Livestock investors gave vent to their contrary urge, selling live cattle futures despite the worst August for placements on feedlots for seven years, but buying lean hogs even though pork levels in storage soared more than 30%.
Many investors expected live cattle futures to post gains on Monday after the US Department of Agriculture said that feedlots took on 2.00m head of cattle last month, a slump of 10.9% year on year, and a decline well above the 6.0% that investors had expected.
The data, signalling weaker supplies of fattened cattle emerging for slaughter in late winter and early spring next year, would likely be viewed as "moderately bullish", Paragon Economics and Steiner Consulting said.
However, live cattle prices posted small losses in Chicago on Monday, including for the early 2013 contracts, as a range of pressures weighed on the market.
Data declining in importance?
Reasons cited by traders included broader economic fears, particularly over China and Europe, which have fuelled funds to sell down net long positions in many agricultural commodities in recent weeks.
At FCStone, Ryan Turner flagged the negative impact of other data in the report, showing that feedlots marketed 4.5% fewer cattle in August than a year before, leaving their overall inventory close to market forecasts.
Furthermore, the data "confirmed what we already knew" in showing relatively loose supplies of cattle "right now, but tightening as we go forward into 2013" as the drop in placements feeds through.
And there is a question over the relevance of the report itself, which used regularly to produce limit up or down moves, given that it does not account for the increasingly important dynamics of smaller livestock farms springing up in states such as Nebraska.
"In the last couple of years, the Cattle on Feed report has become a bit of a non-event," Mr Turner told Agrimoney.com.
'The important question'
At US Commodities, Don Roose flagged a potential headwind to higher prices from the upward pressure on beef values that they implied.
"The important question for 2013 is will the consumer pay up for beef when pork and poultry meat and a lot more reasonably priced," he said.
Indeed, separate USDA data showed that stocks of pork held in US cold storage as of the end of last month was, at 580.8m pounds, 31% higher than a year before, after farmers attempting to escape elevated grain prices ramped up slaughter rates.
"The sharp increase in hog slaughter and seasonally slower demand for pork loins at the end of August likely combined to push more product into freezers," Paragon Economics and Steiner Consulting said.
The data "will likely be viewed as bearish for pork prices in the near term".
Hogs rise ...
Source: Argentine Beef Packers S.A.
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