Underwhelming Cattle Sales Pressure Futures

By Benjamin ParkinFeaturesDow Jones Newswires

Cattle futures fell to their lower daily limit on Friday after physical cattle prices unexpectedly fell.

February-dated live cattle contract at the Chicago Mercantile Exchange dropped 3 cents, or 2.5%, to $1.1925 a pound, the lowest close in three weeks after three consecutive sessions of losses.

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The selloff came as meatpackers paid less for slaughter-ready cattle in the cash market than a week earlier, surprising some analysts. Cattle traded for $122 per 100 pounds on a live basis in northern and southern feeding regions, with dressed sales at $195. Live sales last week averaged at $122.78 live and $194.48 dressed.

Lower cash prices were a "major disappointment" to traders, said Brian Hoops, president of brokerage Midwest Market Solutions, prompting the selloff in futures. Traders had expected higher cash prices through much of the week.

Wholesale beef prices rose, buoyed by strong seasonal demand for red meat. Prices rose for five consecutive sessions to $208.67 per 100 pounds on Thursday and climbed further at midday Friday.

Hog futures were steady. Analysts said selling in the cattle market added to pressure on hog contracts, but rising cash prices helped limit losses.

Cash hog prices rose $2.24 to $62.66 per 100 pounds on Thursday and were expected anywhere from steady to $1.50 higher again on Friday. That would mark two consecutive weeks of higher cash prices, a decisive turnaround after a prolonged slump in the hog market. The reversal was helped in part by freezing weather across hog country, which slowed weight gains and restricted the supply of slaughter-ready pigs to packing plants.

Analysts otherwise see potential headwinds in U.S. livestock markets in 2018. Supply growth is expected to test the ability of otherwise strong U.S. and global demand to stave off oversupply and steady prices.

CME February lean hog futures closed little changed at 71.425 cents a pound.

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

(END) Dow Jones Newswires

January 05, 2018 15:58 ET (20:58 GMT)