US cattle futures on the rise

Jon Condon, 20/06/2011


US cattle futures rose the exchange limit in Chicago on Thursday after data showed meatworks buyers bidding-up for animals, even in the face of surging livestock supplies from drought-hit Mexico.

The trend goes strongly against most other soft and hard commodities in the US futures market.
Futures in both live cattle, cattle finished for slaughter and feeder cattle closed up the limit of US3c/lb, at their highest in nearly a month, even as grains and many soft commodities posted another session of heavy losses.

The jump followed reports of US meat packers paying up to US$109/hundredweight (A$2.25/kg) for fattened cattle on cash markets, up some US$3 on the day.

US beef export sales came in at 15,800 tonnes, according to weekly government data.
The data were seen as fuelling a round of covering by speculators of short positions –that is, bets on falling prices, according to Agrimoney.com

"It's been a while since we have had cattle and feeder cattle up the limit," Market One analyst Mike Mawdsley told Agrimoney. "Of course, funds have been short."

The revival raised hopes of an end to a correction which, at its early-June high-point, took feeder cattle prices down 14pc from their record high in early-April, and live cattle down 18pc.

"Fundamentally, it feels too early for this upside breakout, but the market is saying it's time to go," another analyst, Jerry Stowell, from Country Futures said. "The market now looks poised to start a new trend higher."

The rise in US cattle prices comes at a time when many beef producers in Southern states and Mexico have been running down herds in the face of drought.

Some 40pc of Mexico is suffering a drought billed by President Felipe Calderon as the worst in 70 years. That comes on top of 2010, which was the country’s wettest year on record.

US cattle imports from Mexico, often this year for placement directly into feedlots given the shortage of pasture, have remained firm after jumping 28pc in the first four months of 2011, compared with year-before levels.

Higher Mexican imports have been maintained in recent weeks, as weekly data reports through the first week of June show cattle imports from Mexico 27pc higher year-on-year.

The US Department of Agriculture will shortly release monthly data expected to show placements of cattle in feedlots falling 7.8pc in May from a year before, as supplies of feeder cattle wane.

Meat & Livestock Australia on Friday reported that despite the summer grilling season in the US being a peak beef demand period, the US beef market had been clouded by the slowdown in food service demand.

The weaker demand within the US foodservice sector comes as the US Consumer Confidence Index slipped back 5.2 points in May to 60.8, amid a relatively unchanged unemployment rate at 9.1pc in May (expectations were for jobs to increase 185,000+, but only increased 54,000), and increasing speculation about a double-dip recession.

With US end-users remaining short-bought as slow foodservice sales create market uncertainty, lean manufacturing beef prices for US domestic and imported product continued to fall week-on-week. The US imported 90CL cow beef indicator declined 7.5¢ on last week, to US175¢/lb CIF (Steiner Consulting Group), while the US domestic 90CL beef trim indicator dropped 1¢, to US188¢/lb.


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