October 7, 2013 / 8:04 PM / 4 years ago

LIVESTOCK-US live cattle futures slip on delivery worries

* Firm corn prices pressure CME feeder cattle
    * Most hog futures gain on tight supply expectation
    * Pork packers adjust hog pricing strategies

    By Theopolis Waters
    CHICAGO, Oct 7 (Reuters) - Chicago Mercantile Exchange live
cattle futures posted modest losses on Monday as worries about
potential deliveries weighed, traders said.
    Monday is the first notice day for live cattle deliveries
against October futures that will expire on Oct. 31. The CME
recently said those deliveries will not be affected by the
partial U.S. government shutdown.
    "October futures at 127.875 is a good bit higher than where
cash cattle traded last week, which could prompt deliveries,"
Doane Advisory Services economist Dan Vaught said.
    October closed 0.175 cent per lb lower at 127.875
cents. December finished at 132.300 cents, down 0.125
    Futures were weakened by concerns that the lingering budget
stalemate in Washington D.C. and the looming battle over the
debt ceiling could ultimately hurt beef demand.   
    "We're still geared toward a supply driven market. The thing
that has us worried is a prolonged government shutdown and how
that will affect meat movement," KIS Futures vice president Lane
Broadbent said.
    And deferred-month live cattle futures' premiums to last
week's cash cattle sales discouraged buyers.
    Investors wait for this week's cash cattle trade against the
backdrop of tightening supplies and poor packer margins.
    Last week, cattle in the central Midwest moved at $125 to
$126 per hundredweight (cwt), which was steady to $1 lower
compared to the week before, feedlot sources said.
    Monday's wholesale choice beef price, or cutout, gained a
penny from Friday to $192.16 per cwt. The select price was at
$176.67, also up a penny, as quoted by analytical market
research firm Urner Barry.
    The firm estimated that beef packers on Monday processed
119,000 head of cattle, around 5,400 less than last year for the
same period. 
    CME live cattle weakness and firm corn prices pressured
feeder cattle contracts. Feedlots will buy fewer young cattle if
corn prices move higher. 
    October feeder cattle ended 0.450 cent per lb lower
at 164.000 cents. November settled at 165.475 cents,
down 0.475 cent.
    Other than CME hog spot October futures, other contracts
settled firm in anticipation of a brief supply shortage later
this winter, traders said.
    Bullish investors contend that the U.S. government's recent
quarterly hog report did not account for losses from the Porcine
Epidemic Diarrhea virus (PEDv), which is deadly to baby pigs. 
    Some traders sold spot October and bought deferred months
because of the lack of USDA cash price data needed to help
determine the spot-month settlement on Oct. 14.
    In the meantime, the partial government closure forced the 
country's leading pork packers to change the methods they use to
determine what price to pay producers for hogs. 
    Cash hog prices were mixed on Monday in the terminal and
direct cash markets, hog buyers and private industry sources
    Packers on Monday processed an estimated 429,000 hogs, 3,000
less than last week and down 1,000 head from a year ago for the
same period, as estimated by Urner Barry.
    Spot October finished at 91.600 cents per lb, down
0.250 cent.  
    Most-actively traded December closed up 0.250 cent
to 87.875 cents and February finished at 90.225 cents,
0.375 cent higher.
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