Cattle, hogs tumble on economy, credit fears

By Jerry Bieszk

CHICAGO (Reuters) - U.S. cattle and hog futures tumbled as much as their 3 cent per lb daily trading limit on Thursday as investors and speculators bailed out of the market amid growing concerns over the economy.

The drop was in line with a sell-off in commodities as a credit crunch expanded to the farm sector, and the stock market tumbled 375 points even as the $700 billion rescue plan won Senate approval and headed to the House of Representatives.

Worries that a slowing economy here and abroad will have consumers shifting away from beef steaks and pork chops to lower-priced foods such as poultry and grain-based items like pasta and pizza weighed heavily on markets.

"It's the start of a recession. Unemployment is going to go up, no one wants to own any inventory and the financing for feeder cattle is in serious trouble -- it's just the early stages of a recession," said Jim Clarkson, livestock analyst at A&A Trading Inc.

"It (economy) is going to cut the demand for everything including beef and pork. People are still going to eat but they are going to eat cheap because they are going to be unemployed and not going out to any restaurants," Clarkson said.

October live cattle closed down 2.875 cents at 95.700 cents per lb and December was off 2.400 cents at 98.075 cents. October through August 2009 traded down the daily limit at one time. Contract lows were set in all months that had traded except December.

October feeders ended off 2.975 cents at 100.575 cents per lb and November was off the 3.000-cent limit at 100.600. October through May 2009 traded limit-down during the day and contract lows were set in all months.

October lean hogs finished off 1.775 cents at 65.950 cents per lb and December was off 1.575 at 61.400. Contract lows set in December to October 2009 and February briefly traded down the 3-cent limit.

The credit crisis that has shaken Wall Street and brought down major banks is also affecting consumer spending as Americans worry about their jobs and the economy.

"They (consumer) have lost many billions of dollars in the stock market and billions of dollars in the values of their homes and everybody is just going to be cutting back," Clarkson added.

The higher U.S. dollar added to the negative tone because this would slow exports of all commodities even further.

The Reuters-Jefferies CRB index .CRB, a global commodities benchmark, fell to its lowest level in nearly one year on Thursday as commodities fell under the weight of a rallying U.S. dollar.

U.S. pork is especially sensitive to export problems because exports count for a very large portion of the income to meat packers and hog producers.

Feeder cattle are also very sensitive to financing problems as feedlots need funds to purchase feeder cattle to put on their feedlots and fatten for market. Cash feeder prices have been slipping and the decline picked up this week.

Cash feeders at the closely watched Oklahoma City feeder auction were down $2 to $5 per cwt on Monday after being down $1 to $3 per cwt last week.