Cash prices sink U.S. cattle futures

Weak beef quotes, fund liquidation weighs

U.S. live cattle futures fell Friday on lower-than-expected prices for cattle in the cash market, said analysts and traders.

Chicago Mercantile Exchange live cattle December closed 1.475 cents per pound lower, or 1.15 per cent, at 126.725 cents. February ended down 1.7 cents, or 1.29 per cent, to 130.4 cents (all figures US$).

Live cattle at the CME sank 1.5 percent for the week, and was about steady for the month, after losses on Friday erased early-week gains.

Selling erupted after cash cattle in Kansas moved at $125 per hundredweight (cwt), $3 lower than last week. Packers have yet to buy cattle in Texas and Nebraska, where bids stood at $124 against asking prices of around $128, said feedlot sources.

Aside from a small number of cash cattle in Texas that moved on Monday at $128, packers were lackadaisical in their approach at buying cattle the rest of the week.

"Other than the few nibbles earlier in the week, it seemed like the last stand by packers to find a way to make money processing cattle," said Archer Financial Services broker Dennis Smith.

Packers curbed spending by relying on animals bought in advance through pre-arranged contracts and cutting slaughter rates to stabilize worsening margins.

HedgersEdge.com put the average beef packer margin for Friday at a negative $78.95 per head, compared with a negative $76.70 on Friday and negative $57.90 on Nov. 23.

Packers this week slaughtered an estimated 635,000 head of cattle, 25,000 fewer than a year earlier, according to U.S. Department of Agriculture data.

Futures were also pressured by weaker wholesale beef prices as grocers wrapped up meat purchases before the weekend.

The wholesale price for choice beef Friday morning was $195.75/cwt, down 28 cents from Thursday, and select cuts fell 69 cents to $174.21, said USDA.

Weak fundamentals allowed December futures to slide below the 200- and 100-day moving averages of 127.68 and 127.17 cents, triggering fund liquidation.

February futures slipped beneath the 100-day moving average of 130.69, also prompting funds to purge long positions.

CME feeder cattle fell on live cattle market losses, profit taking and chart selling.

Futures dropped nearly one per cent for the week and was also nearly steady during November.

January closed 1.125 cents/lb. lower, or 0.77 per cent, to 145.625 cents. March finished at 148.425 cents, 1.125 cents lower or 0.75 per cent.

Uneven hogs settlement

Hog futures ended mixed. December drew support from higher cash hog prices while profit taking weighed on February, said traders and analysts.

Strong cash hog prices lifted futures to a six-month high twice this week. CME hogs were up 1.6 per cent for the week and posted a seven per cent gain for the month — its third straight monthly increase.

"Each time people counted cash prices out, they came roaring back, which sent shorts running for cover," a trader said.

Packers bought hogs motivated by their profitable margins, tight supplies and slowly improving wholesale pork demand.

Fund buying also surfaced this month after futures broke through major moving average resistance barriers.

December hogs settled at 84.075 cents/lb., up 0.375 cent or 0.45 per cent. February closed down 0.2 cent, or 0.23 per cent, to 86.925 cents.

– Theopolis Waters writes for Reuters from Chicago.

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