Cows slaughtered for meat
KANSAS CITY (Dow Jones)--U.S. live cattle futures climbed Tuesday as a jump in wholesale beef prices sparked buying.
The February live cattle contract recently climbed 0.35 cent, or 0.33%, to $1.0730 a pound, while the April contract rose 0.12c, or 0.11%, at $1.1157. January feeder cattle were down 0.02c, or 0.02%, at $1.2227 a pound, while March futures were up 0.65c, or 0.53%, at $1.2407.
The U.S. Department of Agriculture reported its choice composite wholesale beef price rose Monday by 65 cents to $166.48 a hundred pounds. Select beef climbed 53 cents to $160.55. The volume of steaks and roasts sold was a moderate 167 loads, and there were 100 loads of trimmings and coarse grind product reported.
The bump in wholesale beef prices fueled renewed buying interest in futures after the USDA reported late last week wholesale beef values fell, raising expectations winter beef demand was softening.
The continued strength in beef markets was "mind boggling," said Joe Ocrant, president of Oak Investment Group, who expects the cattle market to climb as long as beef demand holds up.
Yet traders and analysts said gains in the U.S. dollar could limit advances in live cattle futures by trimming expectations for beef exports.
In addition, some market participants said Monday's jump in wholesale beef prices should have been expected as cash prices for cattle remain high. Yet with processing plants facing negative margins at current cash prices, some expect a softer beef markets by the end of the week.
The latest HedgersEdge packer margin index is a minus $22.90 a head, compared with the previous estimate of a minus $27.30. This is a rough estimate of packer returns on the cattle they slaughter and process expressed in the form of an index.
Cash traders still are assessing the effects of the wintry weather blanketing the Plains, market analysts said. No bids and very few offers are being reported.
The cold temperatures likely will cause cattle to lose weight and almost certainly will slow their rate of growth as they use more feed to maintain core body temperature rather than to grow. In the long-run that could limit beef production, but in the short run, more cattle could be put up for sale to limit their weight loss.
Last week, the weighted average for slaughter cattle was about $1.0550 a pound, or $105.50 a hundred pounds, on a live basis, compared with the previous week's value near $1.0625 a pound, or $106.25 a hundred pounds. On a dressed basis, averages were down nearly a dollar at about $168.25 a hundred pounds.
Feeder cattle futures were narrowly mixed in early trading as limited strength from the live cattle market spilled over into feeders. Pressure was coming from a stronger corn market, which means feed costs will rise to take the younger cattle, or feeders, to slaughter weight.
Slaughter rates fell behind last year's rate as packers attempted to give beef markets an added boost by limiting production, traders said. Further declines were expected this week.
The USDA reported cattle slaughter Monday at 119,000 head, compared with 116,000 a week ago and 126,000 a year ago.
Urner Barry's Yellow Sheet, a trade publication, Monday said beef processors reported fill-in business was moderate to good to open the week. Isolated advances were seen in spot markets with gains occurring in some end cuts, thin meats and ground beef.
