Cattle futures started the week sharply lower as traders faced the prospect of an increase in supply over the coming weeks.
Meatpackers slaughtered 634,000 cattle last week, up 9% from the same time last year, while beef production rose 7% year-over-year to 511.9 million pounds, according to U.S. Department of Agriculture estimates. Average estimated cattle weights also rose.
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"With numbers still increasing, we're seeing adequate amounts of beef and this has got the market under pressure," said Dan Basse, president of research firm AgResource Co. in Chicago.
Analysts say that wide processing margins, which averaged above $80 a head last week according to the HedgersEdge index, have encouraged meat packers to continue absorbing the extra supply and preparing beef for consumption even without a bump in demand. Analysts expect prices to be under pressure going into the fall as a result.
Part of the increase came after a drought in the northern Plains forced ranchers to offload cattle early. That led to a marked increase in herds placed in feedlots for fattening in June.
"You need to get beyond those animals before a more bullish aspect can be entertained," Mr. Basse said.
Live cattle futures at the Chicago Mercantile Exchange fell on Monday, closing just short of their lower daily trading limit. CME August live cattle futures fell 2.3% to $1.1275 a pound. October contracts dropped 2.6% to $1.11125 a pound. Feeder cattle futures also closed lower.
Hog futures, meanwhile, were mostly higher. CME August lean hog contracts rose 0.2% to 83.4 cents a pound, while October futures rose 2% to 68.125 cents a pound.
Hog futures have risen in recent days as traders try to close a gap between the CME lean hog index and pork prices, which are higher. A pound of wholesale pork was 2.14 cents more expensive as of midday Monday, at 97.48 cents a pound, despite dropping on Friday.
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(END) Dow Jones Newswires
August 07, 2017 15:21 ET (19:21 GMT)