Japan Beef Tariffs Shake Cattle Futures

Cattle futures slid after Japan said it was temporarily hiking tariffs on frozen beef imports from the U.S.

Japanese officials said on Friday they were raising duties on U.S. frozen beef exports to 50% from 38.5%.

Japan has become the largest international destination for U.S. beef, accounting for around a quarter of exports. With recent U.S. Department of Agriculture data forecasting growing U.S. cattle herds, analysts were concerned that disruption to beef exports could leave the domestic market oversupplied and depress prices.

"This comes at a very bad time for U.S. beef producers because of the huge 4th quarter production just around the corner," said Dennis Smith, a commodities broker at Archer Financial Services in Chicago.

A monthly cattle report released last week showed cattle placements in commercial feedlots up 16% in June from a year earlier, leaving traders facing a large bump in slaughter-ready supply later this year.

Industry players were concerned that the Japanese tariffs would put U.S. producers at a disadvantage to Australian rivals, who were not subject to a tariff hike due to a trade agreement between the two countries.

"U.S. frozen beef now faces an even wider tariff disadvantage compared to Australian beef," said the U.S. Meat Export Federation in a note.

Those trade woes, combined with falling beef and market-ready cattle prices this week, turned up the pressure on livestock futures at the Chicago Mercantile Exchange on Friday.

CME August live cattle futures fell 1.2%, to $1.129 a pound, while August feeder cattle were also 1.2% lower, at $1.4605 a pound.

Wholesale beef prices, which rose around 25% in the first half of this year on the back of strong exports, were down on Thursday and as of midday Friday.

Prices in the cash cattle trade, meanwhile, were lower than last week. Some cattle traded in southern states at $1.17 a pound on Friday morning, according to the USDA, in line with levels elsewhere earlier this week.

Hog futures fell. Analysts said the selling momentum in the cattle market dragged them lower, though pork and cash prices were also in a downtrend.

CME August lean hog futures fell 1%, to 81.4 cents a pound.

Write to Benjamin Parkin at benjamin.parkin@wsj.com

(END) Dow Jones Newswires

July 28, 2017 15:04 ET (19:04 GMT)