U.S. feeders tumble as corn climbs, live cattle drop

U.S. feeder cattle futures fell on Tuesday as the worst U.S. drought in more than 50 years shrank crop yields, sending corn prices higher while curbing feedlot demand for younger cattle, said analysts and traders.

Investors also cited the lower Chicago Mercantile Exchange live cattle market. CME hogs finished weaker.

Feeder cattle futures started the session mixed, but took a decidedly downward path after the price for December corn at the Chicago Board of Trade (CBOT) peaked at a $8.40-per-bushel session high, traders said (all figures US$).

Spot August feeder cattle closed down 0.75 cent per pound, or 0.53 per cent, to 139.8 cents. Most actively traded September finished at 141.125 cents, 1.675 cents lower or 1.17 per cent.

CME live cattle slid as the threat of more deliveries pressed thinly-traded August through sell stops and below the 20-day moving average of 120.29 cents. Funds sold October after falling through its 20-day moving average of 125.07 cents.

Spot August closed 1.7 cents/lb. lower, or 1.4 per cent, to 119.65 cents. Most-actively traded October ended at 124.625 cents, down 0.85 cent or 0.68 per cent.

Packer bids for cash cattle surfaced at $118 per hundredweight (cwt) against $123 prices from feedlots. Fed cattle last week sold for $120 to $121.

Investors predict packers will fight raising bids for cattle, given futures’ retreat on Tuesday. Also, wholesale beef prices stalled as supermarkets wind down meat purchases for the Labour Day holiday on Sept. 3.

"We’re approaching a slowdown in daily gains on wholesale beef with the window for procurement of beef for Labor Day close to being over," said Allendale Inc. chief strategist Rich Nelson.

The U.S. Department of Agriculture estimated Tuesday morning’s wholesale choice beef price at $193.69/cwt, down 16 cents from Monday. Select cuts slipped five cents to 185.2 cents.

USDA’s monthly cold storage report will be released on Wednesday at 2 p.m. CDT. The data includes total July beef stocks which analysts on average estimated at about 478 million lbs., compared with 470.8 million in June and 415.2 million during July a year ago.

Hogs wilt

Hog futures closed weak as ample hog numbers continued to reduce packer needs for supplies, traders and analysts said.

Hogs are readily available as growers move animals to market ahead of schedule after drought drove the price for feed for livestock to all-time highs. Increased supplies are exacerbated by moderate temperatures that are conducive for hog weight gains.

October hogs closed down 0.1 cent/lb., or 0.13 per cent, to 75.8 cents. December ended at 73.05 cents, down 0.55 cent or 0.75 per cent.

So far this week, packers processed 847,000 hogs, a 12,000-head increase
from last week and 8,000 more than a year ago, according to USDA.

For Wednesday’s cold storage report, analysts on average expect total pork inventories for July at around 561.8 million pounds. That compares with 591.7 million in June and 454.3 million last year in July.

— Theopolis Waters writes for Reuters from Chicago.

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