U.S. live cattle drop on beef output forecast

Chicago Mercantile Exchange (CME) live cattle futures tumbled on Friday after the U.S. Department of Agriculture sharply raised its 2013 beef production forecast and cash cattle traded at lower-than-expected prices, traders and analysts said.

Futures were further pressured by concerns that a severe snowstorm in the heavily populated U.S. northeast would hurt beef demand.

"USDA made a big 290 million-pound increase in beef production and, on top of that, we have a snowstorm hitting our largest demand centre in the U.S. The higher supply and the potentially short-term reduced demand lowered prices today," said Rich Nelson, chief strategist with Allendale Inc.

USDA, in a monthly supply-and-demand report on Friday, raised its U.S. beef production forecast to 25.191 billion lbs., up from 24.901 billion the previous month. The government’s total U.S. red meat and poultry output projection was increased by 946 million lbs.

CME live cattle spot February settled 1.1 cent/lb. lower at 126.45 cents and the most-active April fell 1.4 cent to 130.125 cents. CME March feeder cattle plunged 2.2 cents to 145 per pound (all figures US$).

The spot February contract slid as cash cattle at southern Plains feedlot markets traded at mostly $125 per hundredweight (cwt), about steady with last week but below the $126 to $127 many traders were expecting.

Slumping beef prices kept pressure on packer margins, which remained deep in the red at an estimated negative $61.45 per head, versus a negative $48.10 per head a week ago, according to livestock marketing advisory service HedgersEdge.com.

Although beef prices were expected to begin firming seasonally later this month, prices remained under pressure on Friday.

The U.S. Department of Agriculture quoted the wholesale choice boxed beef cutout at $182.12/cwt, down $1.34 from Thursday. The select cutout fell $1.51 to $179.62/cwt.

Near-term beef demand was expected to take a hit as a massive snowstorm moved into the northeastern U.S. on Friday. Restaurant traffic was expected to be down as some areas could receive more than two feet of snow.

Hogs retreat

Lean hog futures resumed a recent downtrend amid weak pork prices and poor packer margins.

February hogs fell 0.525 cent, to 86.45 cents/lb. The spot contract remained at a wide discount to the latest CME lean hog index price of 90.48 cents ahead of its expiration next Thursday.

Actively traded April hogs ended 0.4 cent lower at 86.125 per pound and June closed 0.100 lower at 94.5 cents.

Cash pork prices edged higher on Friday but remained down sharply on the week. USDA quoted the carcass cutout value at $82.23/cwt, up 54 cents from Thursday but down $4.58 from a week ago.

The average pork packer margin for Friday was a negative $15.35 per head, compared with a negative $16.35 on Thursday and a negative $10.15 a week earlier, according to HedgersEdge.com.

— Karl Plume writes for Reuters from Chicago.

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