October 27, 2008
Demand concerns plunge US cattle futures to 6-month lows
US cattle futures fell to six-month lows on Friday (October 24) and remained weak in later trading on concerns that a recession would cut demand, but losses were pared as the stock market came off session lows.
Live cattle fell to contract lows in all traded months, while most feeder cattle months hit contract lows. Both fell the 3 cent per pound (lb) daily trading limit before paring losses.
John Kleist, broker/analyst with Allendale Inc. said the cattle market is "still in a demand bear market" during meltdowns in domestic and global stock markets but making it vulnerable during recession.
He added that the world recession is a reminder that beef exports are going to stay on the weak side for awhile.
Kleist said the market may be nearing a temporary bottom after sliding to contract lows in most months.
For this reason, the stock market while it's lower, has come back formidably and may go in a consolidation for a while, adds Kleist.
The October live cattle contract was off 1.150 cents at 88.600 cents per lb and December off 1.250 at 88.625 cents.
October feeder cattle were off 0.975 cents at 96.800 cents per lb and November off 1.325 at 95.450. Contract lows were set in November to May 2009.
Collapsing financial markets worldwide fuelled selling in cattle futures overnight and early amid worries a slowing economy will reduce demand for higher priced meats like beef.
On Thursday (October 23), USDA put choice wholesale boxed beef down US$1.08 at US$143.30 per hundredweight (cwt), the lowest since April 10. Select cut was off US$1.74 at US$135.82 per cwt.
USDA also reported the weekly beef export shipments last week totalled 7,700 tonnes, down from 8,900 tonnes the previous week and the lowest since late March.
Feeders followed live cattle futures and the stock market lower, with selling coming despite higher cash feeder cattle prices this week.
Lean hog futures managed to recover much of their stock market-induced losses in later open outcry pit trade. Losses were limited because of firm cash hog and pork prices and expectations that consumers will switch to pork and poultry from higher-priced beef.
December lean hogs traded up 0.375 cent at 58.300 cents per lb and February up 0.025 cent at 64.200.
USDA also on October 23 put the pork carcass cutout, computed from various pork cuts, was up 45 cents at US$66.39 per cwt.