Cattle futures tumbled as traders questioned whether demand will be able to keep pace with rising beef prices. Hog contracts were mixed.
Meatpackers over the past two weeks have paid sharply higher prices to secure cattle ahead of an anticipated bump in holiday beef demand, traders said. Some of those price increases are being handed to consumers in the form of higher wholesale beef prices.
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Swelling supplies of pork and beef, and concerns that export and domestic demand could falter as prices climb, sent live cattle futures prices sharply lower Monday, the second such decline in three trading sessions. December-dated live cattle contracts fell 1.6% to $1.2532 a pound at the Chicago Mercantile Exchange. February-dated contracts declined 0.8%.
"Beef and pork are fighting and competing for both domestic and export demand, because their [production] numbers are both increasing," said Mike Zuzolo, president of Global Commodity Analytics & Consulting in Atchison, Kansas.
December-dated live cattle futures remain nearly 13% higher than they were a month ago. But after rallying on higher cash prices paid by beef processors over recent weeks, Mr. Zuzolo said that cattle futures needed more bullish news to keep up the momentum. U.S. Department of Agriculture data in recent days on export sales and production didn't do the job, he said.
Beef processors are asking retailers and food service operations to pay more for beef as cattle become more expensive. The USDA estimated choice-grade beef wholesale prices at $2.0925 a pound Monday, rising 0.51 cent from Friday, and up 2.9% over the past week. Beef processing margins have constricted, with HedgersEdge and RJ O'Brien calculating the beef packer margin index at plus 80.10 per head, down from 140.85 a week ago.
December-dated lean hog futures at the CME settled 0.7% lower at 64.625 cents a pound, after early sales in Midwestern terminal markets showed continued declines in cash prices paid for hogs. Contracts expiring in February settled slightly higher.
Meat processors have slowed their hog purchasing ahead of a seasonal slowdown in the weeks prior to the Thanksgiving holiday, traders said.
Longer term, concerns remain about record-high numbers of hogs sent to slaughter in recent weeks, putting greater pressure on meat companies and trade groups to maintain growth in U.S. pork exports.
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(END) Dow Jones Newswires
November 06, 2017 15:13 ET (20:13 GMT)