USA - Cattle futures

01 May 2012

U.S. live-cattle futures moved higher on Tuesday after a surge in beef prices signaled the possibility that beef demand is on the rebound.


Cattle for April delivery were recently up 0.57 cent, or 0.5%, at $1.2130 a pound in trading at the Chicago Mercantile Exchange.


The CME June cattle contract was up 0.4 cent, or 0.3%, to $1.1655 a pound. April feeder-cattle futures were higher by 0.8% at $1.5150 a pound.


Sooner-expiring futures extended modest gains from Monday as government wholesale-beef prices recorded large daily gains.


They rose for the second consecutive trading day, a potential sign that beef demand is rebounding after sliding steadily for six weeks.


On Monday, the U.S. Department of Agriculture's choice-grade beef prices closed up $2.75 per hundredweight to $181.26. Select-grade prices gained $3.16 to $180.49.


Both indexes fell more than 10% between early March and mid-April as sticker shock at the meat case, elevated gasoline prices and controversy over a ground-beef additive all weighed on consumer demand.


Higher gasoline prices are thought to squeeze consumers' discretionary budgets, forcing many towards cheaper groceries and meals.


Futures fell alongside beef demand and have in recent days begun to recover. The spot contract, or soonest-expiring futures, gained 4 cents a pound, or 3.5%, over the last week.


They had fallen more than 10% from record highs set at the beginning of March.


Monday's sharp rise in beef prices provided relief to operating margin estimates for processors, which have been in negative territory for months.


The latest HedgersEdge packer margin index was minus $65.90 per head, compared with minus $88.90 the previous day.


This is an estimate of packer returns on cattle slaughtered and processed expressed in the form of an index.


The building rally in beef prices has also followed a cut in meat production at financially stressed processors, which have repeated some tactics from late winter.


Then, they slashed slaughter rates to limit costs for cattle, which had outstripped wholesale-beef prices, leading to deeply negative processing margins. The smaller resulting meat inventories in turn forced prices higher.


Processors' margins remain loaded with red ink and meat production fell nearly 7% week-over-week, as of Friday.


Cattle owners in cash markets are hoping the sharp gains in wholesale-beef prices will extend through the week and lead to better demand among processors for fresh supplies of animals.


Cash-cattle traders will closely watch beef prices as well as futures, which could both determine prices as the week progresses.


Inventory lists, released Monday, suggest supplies are modestly higher than a week ago.


So far, no bids have been reported, but some may be established later in the day. Asking prices will likely be unchanged from Monday unless futures make a sharp upward move.


In Texas and western Oklahoma, cattle were priced at $1.24 to $1.25 a pound live and in Kansas at mostly $1.24. Asking prices on a dressed basis in Nebraska are reported at $2 a pound and higher...








Source: Argentine Beef Packers S.A.

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