Cattle Futures Fall on Higher Supply Outlook
September 25 2017 - 4:02PM
Dow Jones News
By Benjamin Parkin
Cattle futures tumbled Monday on expectations of higher supplies
early next year.
The U.S. Department of Agriculture said on Friday that feeders
placed 3% more cattle in lots for fattening in August than a year
earlier, while analysts had expected the rate of placements to fall
by 3%.
That pressured a market that had rallied in part on expectations
of lower slaughter-ready cattle supplies early next year. It
prompted heavy selling in cattle futures on Monday as traders
revised their expectations.
December live cattle futures fell by their daily limit of 3
cents, or 2.6%, to $1.14425 a pound at the Chicago Board of Trade.
The most-active October contract fell 2.1% to $1.09225 a pound.
Feeder cattle futures were also sharply lower.
The USDA's report was "a very negative surprise," said Dennis
Smith at Archer Financial Services. Record-high fourth quarter
production was likely to continue into higher output early next
year too, he said.
In a separate report, the USDA said frozen beef stocks in August
rose by 10% from a month earlier, also above analysts'
expectations. That was the largest increase in August beef
inventories in 15 years, said Ken Morrison, a trader and author of
commodity newsletter Morrison On The Markets, in a note to
clients.
The pessimistic outlook for cattle and beef supplies
overshadowed higher cash-market prices last week. Meatpackers paid
an average of $108.49 per 100 pounds on a live basis and $170.59
dressed, several dollars higher than a week earlier, amid a
short-term supply pinch.
Hog futures bounced on Monday, finding support from higher pork
prices at midday and as traders bet against the cattle market.
But the near-term outlook is expected to pressure prices,
particularly in the cash market. Hog weights, slaughter numbers and
pork production all increased last week.
CME October lean hog futures rose 1.1% to 56.325 cents a
pound.
Write to Benjamin Parkin at benjamin.parkin@wsj.com
(END) Dow Jones Newswires
September 25, 2017 15:47 ET (19:47 GMT)
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