Chicago | Reuters — U.S. live cattle fell to the lowest levels more than a year on Wednesday as investors sold off holdings on worries the recent downturn in global equities markets will result in lower demand for pricy meat cuts such as steaks.
Anticipation of lower trade in cash cattle markets in the U.S. Plains also weighed, with the most-active Chicago Mercantile Exchange (CME) October cattle contract declining to the lowest point since May 2014.
U.S. stocks rebounded following several straight sessions of losses. But cattle extended declines to the fourth straight session and, with three trading days left in August, were on track for their fifth consecutive monthly loss.
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“(Beef) packers have nice margins right now but, at the end of the day, we are looking at serious issues in the equities markets. We’re going to need more stabilization (in stocks) for folks to want to maintain longs,” said Craig VanDyke, analyst at brokerage Top Third Ag Marketing.
Cattle has a strong correlation to U.S. stock indices as lower returns in equities or poor consumer sentiment can lead shoppers to trade down to cheaper proteins at grocers and restaurants.
October live cattle last traded 0.925 cent lower at 140.775 cents/lb. while front-month August eased 1.175, to 142.5 (all figures US$).
“Too aggressive”
Feeder cattle and lean hogs also lost ground, with hogs falling one per cent or more in a profit-taking correction after gains of more than seven per cent in the first two days of the week.
Investors bought hogs contracts on optimism of more export business to China, where the hog herd has declined. However, U.S. pork production is likely to be record-large this year, and some traders exited their bets on ideas that this week’s rally was overdone.
“Perhaps we were too aggressive the last couple of days,” Allendale Inc. analyst Rich Nelson said of hogs.
Hogs for October delivery last traded 0.375 cents lower at 67.125 cents/lb. October feeder cattle were down 0.85 cent at 194.9 cents/lb., according to CME Group data.
— Michael Hirtzer reports on agriculture and ag commodity markets for Reuters from Chicago. Prices shown in this report reflect settlements at 1:03 p.m. CT.
