(Oct. 26) U.S. live cattle futures drifted lower on Friday in response to a drop in wholesale beef values as retailers pushed back against near-record high prices, said analysts and traders.
Chicago Mercantile Exchange live cattle investors were uneasy about economic worries on Wall Street. Some pointed to technical issues after futures breached moving average support levels this week.
"We broke down technically. And, I think we’re also getting pressure from the stock market given the perception of this fiscal cliff situation in front of us," said A&A trading broker Jim Clarkson.
If the economy falters it would be difficult for grocers to justify buying beef from processors with prices flirting with record highs, he said.
The U.S. Department of Agriculture Friday morning showed the price for wholesale choice beef at $197.48 per cwt, compared with $199.58 early Thursday. The record high is $201.18 set on Oct. 16, 2003.
Investors are tracking two major storm systems threatening the East Coast region that could dent meat demand.
"People are talking about that because it’s the biggest meat eating section of the United States that looks like its going to get hit with a double whammy," said Clarkson.
Cattle futures finished down less than 1 per cent for the week after prices for cattle in the cash market came in steady with last week at $127 per cwt, but short of some $128 expectations.
Packers held the line on cash spending while trying to get a grip on their elusive margins.
HedgersEdge.com put beef packer margin for Friday at negative $22.95 per head, compared with negative $18.80 on Thursday and negative $9.90 on Oct. 19.
Spot October live cattle closed down 0.250 cent per lb to 125.500 cents. December ended down 0.400 cent at 125.250 cents.
CME feeder cattle followed the live cattle market lower while ending down slightly for the week. Futures were also at a premium to the exchange’s feeder cattle index of 144.91 cents.
November feeders closed 0.725 cent per lb lower at 145.325 cents. January ended at 147.075 cents, 0.900 cent lower.
Hog futures turned higher, aided by December’s discount to cash hog prices that were recently weakened by thin packer margins and plentiful supplies.
December closed 0.775 cent per lb higher at 78.900 cents. February ended up 0.175 cent to 84.450 cents.
Cash hogs traded lower in Iowa/Minnesota markets on Thursday, averaging 82.35 cents per lb, USDA said.
Spreaders also bought nearby trading months and sold deep-deferred contracts with the view that producers might cull fewer animals if corn prices continue to decline.
The average pork packer margin for Friday was estimated at a positive $0.80 per head, compared with negative $1.35 on Thursday and positive $3.10 for Oct. 19, HedgersEdge.com said.
Theopolis Waters writes for Reuters in Chicago.