* Hogs slide with lower cash prices, but up for the week
* Live cattle mixed on positioning, post weekly loss
By Theopolis Waters
CHICAGO, July 13 (Reuters) – U.S. feeder cattle futures fell
to a nine-month low on Friday to give the market its worst week
in a year as investors sold amid worries demand for young
animals by feedlots would decline as feed corn prices were
pushed higher by the Midwest drought.
Chicago Mercantile Exchange hogs ended lower in response to
a drop in cash hog prices, but were up 1 percent for the week.
CME live cattle settled mixed on pre-weekend short-covering
after being down 1.7 percent this week.
The CME feeder cattle closed sharply lower, but above
their 3-cent daily limit, which was hit during the session and
was a nine-month low.
Corn prices fluctuated throughout the session and closed
mostly higher and kept feeder cattle investors on the defensive.
Spot August feeder cattle ended 2.225 cents lower,
or 1.58 percent, at 139.000 cents per lb and earlier slumped to
a 10-month low.
September closed down 1.975 cents, or 1.37 percent,
to 142.150 cents and posted a contract low of 141.125 cents.
A 40-percent jump in corn prices this summer had feedyards
losing money on fattened cattle. Corn’s rise was fueled by the
worst drought in the Midwest in almost 25 years. That drought
also dried up pastures, forcing ranchers to sell cattle to
feedlots.
“There is still continued concern about corn and feeder
cattle pushing in from pastures into the feedlots that are
drowning in red ink,” said Allendale Inc. director of research
Rich Nelson.
The surge in corn prices, which began about a month ago,
also has taken their toll on margins at meat companies like
Smithfield Foods Inc, which feeds hogs, and Tyson Foods
Inc, which feeds chickens.
HOGS FALL
CME hogs closed lower after packers trimmed bids for hogs in
the cash market to shore up their sagging bottom lines.
Thinly-traded spot July hogs finished 0.075 cent
lower, or 0.08 percent, at 97.225 cents a lb. It closed at a
discount to CME’s lean hog index of 99.25 cents. The spot month
expires on Monday.
August hogs closed 1.875 cents lower, 2.03 percent,
to 90.400 cents. It fell below the 100- and 40-day moving
averages of 91.93 and 91.17 cents, respectively, touching off
fund liquidation.
The USDA on Friday estimated the average hog price in the
closely watched Iowa/southern Minnesota market at $91.86 per
cwt, down $4.32 from Thursday.
HedgersEdge.com estimated the pork packer margin at a
negative $10.50 per head, compared with a negative $21.70 a week
ago.
Additionally, word that China has ramped up its pork
production weighed on CME hog futures.
China’s pork production was up 5.9 percent during the first
half of the year and hog inventories rose 3.5 percent from a
year ago, according to that country’s National Bureau of
Statistics.
“They are looking at increased production for the first half
of the year and that should limit their U.S. pork buying in late
July and August,” Nelson said of China.
LIVE CATTLE MIXED
CME live cattle traded mixed on short-covering and position
evening before the weekend.
Spot August live cattle closed up 0.175 cent per lb,
or 0.15 percent, to 117.200 cents. October ended down
0.200 cent, or 0.16 percent, to 121.450 cents.
Spreaders bought the August contract and sold deferred
months despite lower cash cattle prices.
Even though packers this week cut cash bids due to fading
profit margins and lackluster wholesale beef demand, some
traders expect higher cash cattle prices in August.
Cash cattle this week traded at $115 per cwt, down $2 to $3
from a week ago.
The price for choice beef at wholesale on Friday was
estimated at $183.94 per cwt, down $2.09 lower from Thursday and
down $8.71 versus a week ago.
“Live cattle are bearish near term, but some guys are
looking at the big picture. With more cattle coming off burned
up pastures right now, that’s going to lead to tighter supplies
down the road,” a CME live cattle trader said.
