U.S. livestock: Cattle futures ease ahead of USDA report

Chicago | Reuters — Chicago Mercantile Exchange livestock futures were lower on Friday, with both live cattle and lean hogs easing on worries that U.S. supplies were growing faster than demand, traders and analysts said.

Cattle futures declined ahead of the U.S. Department of Agriculture’s monthly Cattle on Feed report, which was released after the close of trading.

The report showed 11.4 million cattle in feedlots as of Oct. 1, about five per cent more than a year ago and the most ever in the data series that started in 1996. Still, that was slightly less than analyst expectations for a 6.4 per cent spike.

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Some 2.051 million cattle were placed on feed in September, down five per cent from last year. Analysts anticipated a roughly 0.1 per cent increase.

The smaller numbers could boost cattle futures on Monday, even if overall cattle supplies remained ample.

“This is a surprise and we have to treat it as such,” said Allendale Inc. analyst Rich Nelson.

“The September-October-November period is the biggest placement push for the whole year, and this first month gives us some question about spring supplies,” Nelson said. “I don’t know if it shakes up the fact that we will still have a heavy summer supply in 2019.”

It generally takes several months for cattle to reach slaughter weight after they are placed in feedlots. Smaller-than-expected placements could lift February live cattle futures on Monday.

The most-active December live cattle contract settled 0.4 cent lower at 116.775 cents/lb. while February cattle were down 0.225 cent, to 121.15 cents.

U.S. Commodities analyst Don Roose said higher prices for feeder cattle during September likely limited demand, contributing to the smaller placements.

CME November feeder cattle settled down 0.325 cents at 154.1 cents/lb. The contract surged from mid-September, reaching a lifetime peak of 159.725 cents on Oct. 1 before turning sharply lower in recent weeks.

“The feeders were pretty high to make it work,” Roose said of feedlot profitability.

CME December lean hog futures declined 0.7 cent, to 51.6 cents/lb., a nearly two-month low.

USDA will release monthly cold storage data on Monday. A few analysts expected U.S. pork supplies in cold storage of 597 million lbs., which would be down from 619 million lbs. as of Sept. 30, 2017. Beef in cold storage was estimated at 534 million lbs., up from 496 million a year ago.

— Michael Hirtzer reports on commodity markets for Reuters from Chicago.

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