Cattle futures tumbled after meatpackers paid less than expected for slaughter-ready herds.
Packers bought fattened cattle for $124 per 100 pounds on a live basis in Texas and Kansas on Wednesday, slightly below last week's highs of $126.
Sharp gains in the cash market for physical cattle last week had prompted a futures rally, and traders were expecting cash prices to continue rising this time around.
"The trade is a disappointment for cattlemen that were hoping for $128.00 activity," said research firm AgResource Co. in a note to clients. "Next week is that last full week before the U.S. Thanksgiving Day holiday, so the weaker trade is not what the bulls were hoping for."
December-dated live cattle contracts fell 1.4% to $1.22925 a pound at the Chicago Mercantile Exchange on Wednesday, the third consecutive day of losses.
Cattle also sold at the closely watched Fed Cattle Exchange auction on Wednesday morning for $124 in southern states. Packers further north paid $192 on a dressed basis, market observers said, similarly below last week's highs.
"Maybe we had gotten just a little bit ahead of ourselves," said Jason Britt, president of Central States Commodities in Kansas City, Mo. "That's why we're having a little push back here."
Hog futures accompanied cattle prices lower on Wednesday. CME December lean hog contracts slid 0.6% to 63.55 cents a pound.
The hog market is losing ground as traders fret over a buildup in supply. Meatpackers didn't slaughter as many hogs as expected last week, despite expanded processing capacity after two new packing houses opened in September.
As a result, analysts say, average hog weights are rising as the pigs reach their required slaughter size without a place to go.
That's compelling producers to lower their asking prices as they try to offload those herds. Cash hog prices have fallen consistently in November, and were expected to continue trending lower on Wednesday.
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(END) Dow Jones Newswires
November 08, 2017 15:43 ET (20:43 GMT)