U.S. livestock: Cattle limit down after bearish USDA report

Chicago | Reuters — Chicago Mercantile Exchange cattle futures tumbled about two per cent on Monday after government data on Friday showed bigger-than-expected placements of cattle on feed in August.

Most-active CME December live cattle dropped by the daily price limit of three cents to finish at 114.425 cents per pound, reversing from Friday’s 1-1/2 month high (all figures US$). Front-month October cattle settled 2.35 cents lower at 109.225 cents.

The U.S. Department of Agriculture following the close of futures trading on Friday said the number of cattle that moved into feedlots spiked three per cent last month. Analysts had predicted a decline in placements of nearly three per cent.

Bigger placements suggested more cattle would reach slaughter weight by late this year and early next year.

USDA also showed ample supplies of U.S. beef in cold storage, further pressuring cattle futures.

“It was a knee-jerk reaction,” CHS Hedging Steve Wagner said of the selling in cattle.

December cattle quickly fell by the daily price limit when trade resumed on Monday and remained locked limit-down until the close. CME October feeder cattle fell by their price limit of 4.5 cents to finish at 151.6 cents/lb.

Trading limits in live cattle will be expanded to 4.5 cents on Tuesday and feeder cattle limits to 6.75 cents, the CME Group said on its website.

Wagner said cattle futures could rebound based on strong demand from beef packers. Packers last week in the southern U.S. Plains paid about $108/cwt for cattle, up from $105 to $106 in the previous week.

CME lean hog futures were higher, recovering from recent losses on technical buying and unwinding of cattle-hog spreads.

Front-month CME October lean hogs fell to a contract low of 55.375 cents/lb., before finishing up 0.625 cent at 56.325 cents. Most-active CME December hogs gained 0.8 cent to 57.425 cents.

“It’s a reversal… the (hog) market has been oversold long enough where we can have a nice bounce,” Wagner said.

— Michael Hirtzer reports on commodity markets for Reuters from Chicago.

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