U.S. live cattle futures fell on profit-taking following recent market advances on worries that wintry weather in the U.S. Plains could hamper beef and pork production, traders and analysts said.
There were reports of blizzard conditions and heavy snows in sections of the Plains snarling transportation of livestock and causing the shutdown of a few hog plants in Iowa.
Chicago Mercantile Exchange live cattle traders brought futures closer in line with cash cattle sales, and investors exercised caution before the government’s cattle report on Friday (Dec. 21).
Spot December cattle closed 0.525 cents per pound lower at 128.95 cents. Most actively traded February ended down 0.85 cents at 133.5 cents (all figures US$).
On Thursday, cash cattle in Texas and Kansas moved at $126 per hundredweight (cwt), $1.50 to $2 higher than last week, said feedlot sources.
Bids for slaughter-ready cattle in Nebraska stood at $124/cwt versus $129-$130 asking prices, a feedlot manager said.
He said some packers were having trouble getting cattle from feedlots after the "snow event" left up to seven inches in areas of the state.
The weather’s impact was reflected in the U.S. Department of Agriculture’s slaughter data.
Packers on Thursday processed an estimated 117,000 head of cattle, down 10,000 from a week earlier and 11,000 less than the same period a year ago.
Some processors spent more for cattle as weather restricted supplies, while others padded inventories before year-end holiday disruptions, a trader said.
Packing plants will be closed at least one day next week for the Christmas holiday on Dec. 25 and the following Tuesday for New Year’s.
The holiday downtime will give packers a chance to realign their margins and help underpin wholesale beef prices.
USDA’s wholesale choice beef price on Thursday was $192.06/cwt, $1.49 lower than Wednesday; the select price was $176.70, up 25 cents.
HedgersEdge.com put the average beef packer margin for Thursday at a negative $44.50 per head, compared with a negative $44.25 on Wednesday and a negative $26.18 on Dec. 13.
CME feeder cattle futures mimicked live-cattle market losses. January closed 1.2 cents/lb. lower at 152.275 cents. March ended down 0.9 cents, to 154.85 cents.
Cash expectations drop hogs
CME hogs slid on profit-taking and sentiment that negative margins would prompt packers to cut cash hog bids into next week, said analysts and traders.
The average pork packer margin for Thursday was a negative $2.10 per head, compared with a positive $2 on Wednesday and a positive $4.58 on Dec. 13, according to HedgersEdge.com.
USDA on Thursday showed the average price for hogs in the most-watched Iowa/Minnesota market at $82.06/cwt, down 38 cents from Wednesday.
Despite the onset of wintry weather in the western and northern Plains, processors have inventories booked for the rest of the week, a trader said.
Packing plants also will be dark on Tuesday for the Christmas holiday, limiting their need for supplies.
"Hog weights show that producers are very current in sending their hogs to market, and in good shape to ride out the shortened slaughter weeks associated with the upcoming holidays," said independent livestock futures trader Dan Norcini.
As much as 10 inches of snow fell in parts of Iowa, shutting down at least three hog packing plants, an industry source said. Those plants will make up the downtime on Friday and Saturday, he said.
USDA estimated Thursday’s slaughter at 380,000 head, off 53,000 from week earlier and 52,000 less than the same period a year ago.
Initial trader and analysts estimates for Saturday’s slaughter were bumped up to roughly 300,000 from 275,000 as a result of the storm.
February hog futures settled at 86.450 cents/lb., down 0.125 cents. April finished at 91.175 cents/lb., 0.275 cent lower.
— Theopolis Waters writes for Reuters from Chicago.