Lower Beef Prices Weigh on Cattle Futures
23 May 2017 - 8:29PM
Dow Jones News
By Benjamin Parkin
CHICAGO -- Cattle futures sank Tuesday as lower beef prices
spurred bets that the market was unwinding from its seasonal
peak.
Wholesale beef prices fell sharply Tuesday morning to $2.46 per
pound from a little under $2.48 a pound on Monday. That added
pressure to live cattle futures, with June contracts closing 0.7%
lower at $1.23075 a pound at the Chicago Mercantile Exchange.
August feeder cattle futures also fell.
Cattle futures have flip-flopped after hitting a high in early
May, while prices on the cash market have also struggled. The
soaring value of wholesale beef, however, has cushioned packers to
continue paying more for their inventory, preventing a sharp
correction. Beef prices will likely start trending lower too, said
Steve Wagner of brokerage CHS Hedging in Minnesota.
"Packers are making very good money, and I think they're going
to stay in the game until that changes," Mr. Wagner said.
The HedgersEdge beefpacker margin index rose to $153.90 per head
on Tuesday, despite being in the red less than two weeks ago.
A government cold storage report released after the markets
closed Monday also pressured beef prices after showing a
lower-than-expected drawdown in beef stocks in commercial freezers
by 1% from the previous month.
While slightly negative, the report "can be a little deceiving
as a lot of product in storage is staged there awaiting export,"
said Troy Vetterkind, of Vetterkind Cattle Brokerage in
Wisconsin.
An unexpectedly large addition in frozen pork stocks, which rose
9% from March to April, had a limited impact on the futures trade.
After opening lower, CME June lean hog futures proceeded to close
up 1% at 80.15 cents a pound.
Part of the strength could be because of funds switching course
to bet hog futures would rise while cattle fall, said Mr. Wagner,
with pork prices heading toward their late spring boost.
Write to Benjamin Parkin at benjamin.parkin@wsj.com
(END) Dow Jones Newswires
May 23, 2017 15:14 ET (19:14 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.