July 22, 2011

 

US cattle futures close higher amid increasing beef exports

 

 

US cattle futures closed higher on Thursday (Jul 21) following an increment in weekly beef exports that partly resulted from shipments to Japan as the nation fights against radiation contamination in its local beef.

 

Hog futures finished higher in nearby contracts, lifted by stronger cash hog and pork markets as a headline-making heatwave slowed hog marketings, traders said.

 

The USDA reported 23,600 tonnes of beef were sold for export last week, the second largest this year. The number marked a gain of 38% from the prior week and was up 41% on year.

 

A Monday (Jul 18) USDA beef report indicated this week's exports would be large, but some traders said Thursday's number still came as a shock to some.

 

Of the total, Japan bought 4,200 tonnes, its largest purchase in more than a month. Japan is being shaken by revelations that radiation-contaminated beef was distributed to stores and restaurants.

 

"People will now think that because of that radiation problem, they will be buying US beef," an analyst said.

 

Japan has been a regular buyer of US beef and in 2011 is the fourth-largest export purchaser.

 

Lower beef prices in a morning report trimmed futures' gains, but the large volume of sales, 274 loads versus 181 a week ago, attracted enough buying to keep the market higher.

 

"We had huge October/December spreading on Wednesday (Jul 20). They are betting placements will be down more than expected," a cattle trader said.

 

The spreading was attributed to traders preparing for Friday's (Jul 22) monthly feedlot cattle report, which analysts on average expect to show 2.7% more US feedlot cattle on July 1 than a year ago but a 6.5% dip in placements.

 

Also due on Friday is the USDA's semiannual cattle inventory report, which is forecast to show a 1.3% smaller US cattle herd. The inventory report includes beef and dairy cattle as well as cows and young calves.

 

August cattle futures 2LCQ1 closed up 0.400 cent, or 0.36%, at 110.00 cents per lb and October 2LCV1 up 0.100 cent, or 0.09%, at 115.400.

 

Feeder cattle followed cattle higher, with additional support from lower corn futures.

 

August feeder cattle futures 2FCQ1 closed up 0.275 cent, or 0.2%, at 135.200 cents per lb and September 2FCU1 up 0.175, or 0.13%, at 135.800 cents.

 

Hog futures finished higher, but some traders had expected bigger gains due to strong cash hog and pork markets.

 

"The cash news is terrific but the market acts sluggish," said one trader.

 

Hot weather has slowed cattle marketings and helped push up cash hog and pork prices. The USDA on Wednesday (Jul 20) reported the average wholesale pork price, or cutout, was US$99.43 per cwt, up 13 cents from Tuesday (Jul 19).

 

Cash hogs traded up 41 cents per cwt in Iowa/Minnesota markets early on Thursday after trading $1.38 higher on Wednesday.

 

In pit trading, CME August hog futures 2LHQ1 closed up 0.250 cent, or 0.26%, at 98.100 cents per lb and October 2LHV1 up 0.250, or 0.28%, at 90.650.