US cattle futures hit four-month high
TOWARDS the end of last week cattle futures prices rallied to their highest level since June, before easing off again this week.
The Chicago Mercantile Exchange December live cattle contract (for fat [finished] cattle ready for slaughter) rose from around 64.5¢/lb a week ago to just over 66¢ (87p/kg) on Friday. However, prices retreated to close at 65.7¢/lb on Tuesday, 27 October.
The market was led higher by hopes of a further rally in the cash prices paid by the packing houses. However, in the absence of aggressive buying interest from the slaughterhouses, the cash price stagnated and this depressed the futures once again.
Packers are currently bidding 63¢/lb against offers of 64-65¢/lb. While this is unchanged from last week, the market was at 57¢/lb just a month ago.
Producers are hoping that oversupply is finally being redressed and prices have bottomed out. Cattle slaughter in the first nine months of the year rose 3% from a year ago to 1.2 million head. This is an encouraging sign that the industry is clearing its backlog.
Fewer feeder [store] cattle are entering the feedlots and grain is expected to remain cheap, both factors which should support cattle prices. However, average slaughter weights have risen 3% from last year to 1200lb/head (545kg) and this is adding to the amount of beef being produced. Heavy weights will continue to burden the industry for several months, some analysts warn.
Pig prices keep on sliding in USA
US pig futures prices continue to fall further this week, depressed by weakness in the cash market.
The price paid for slaughter eased from 27¢/lb last week to 24¢/lb (32p/kg) at present. Meanwhile the Chicago Mercantile Exchange December lean pigs futures contract lost 1.5¢ on the week to close on Tuesday, 27 October at 39.85¢/lb (52.5p/kg).
Although domestic prices are under pressure, the Russian aid story is still attracting much attention. Now that Russia has formally requested food aid, pig producers are hoping that the US Department of Agriculture will send more pork and less grain to Russia, thereby helping to alleviate domestic oversupply.
The US pork market is already oversupplied and there is more to hit the market in 1999 if producers go ahead with their expansion plans. During September, pork production reached a record high of 1.6 billion lbs, up 7% from a year ago. The slaughter rate also rose 7% to 8.59 million head, according to the latest monthly report from USDA.