CHICAGO, Aug 28 (Reuters) - U.S live cattle futures fell on Wednesday on large domestic supplies, analysts said, as the U.S. Department of Agriculture launched an investigation into the wide gap with beef prices.
Cattle prices have weakened recently after a fire at a Tyson Foods Inc slaughterhouse in Kansas temporarily eliminated a key buyer of livestock.
Beef prices, meanwhile, climbed as buyers for restaurants, food service companies and grocery chains worried about a shortage.
The USDA will investigate whether there is evidence of unfair practices.
“It’s a disruption that you weren’t expecting by any means,” Bill Lapp, president of Advanced Economic Solutions, a commodity analytical firm, said about the fire.
“It’s shocking the system at a time when demand is strong.”
The surge in beef prices has already rationed some demand, though, analysts said. Packers have also increased slaughtering at other plants while the Tyson plant in Kansas is shut to profit from strong margins.
Processors have killed 349,000 cattle so far this week, up 2,000 from a week ago, according to USDA data.
Prices for select boxed beef cutout rose $1.10 to $211.81 per cwt, while choice cutout fell $3.80 to $232.96, the USDA said in a separate daily report.
Chicago Mercantile Exchange (CME) October live cattle futures settled 0.575 cent weaker at 99.200 cents per pound. October feeder cattle dropped 0.875 cents to 131.625 cents per pound.
In the hog market, futures moved higher after falling a day earlier under pressure from large supplies.
Traders are trying to assess demand from China, the world’s largest pork consumer, as it struggles with an outbreak of a fatal hog disease that has killed millions of pigs.
China imposed retaliatory tariffs on imports of U.S. pork and other farm products last year as part of the countries’ ongoing trade war, slashing U.S. agricultural exports.
But China has the potential to significantly increase pork imports if a trade deal is reached because of the outbreak of the pig disease, African swine fever.
CME October lean hogs rose 0.275 cent to 63.500 cents per pound. (Reporting by Tom Polansek in Chicago Editing by Tom Brown)