LIVESTOCK-U.S. cattle futures drift lower as corn prices soar

CHICAGO, June 30 (Reuters) - U.S. cattle futures closed modestly lower on Tuesday, pressured by a surge in Chicago Board of Trade (CBOT) corn futures that is likely to squeeze profit margins for livestock producers, traders said.

“The rise in feed costs changes the dynamics in the industry. It cuts into profits - or in the case of hogs, it could exacerbate losses,” said Dan Norcini, an independent livestock trader.

Chicago Mercantile Exchange (CME) August live cattle futures settled down 0.200 cent at 96.275 cents per pound while August feeder cattle fell 0.650 cent to end at 132.850 cents per pound.

CBOT September corn futures rose nearly 4% on Tuesday and touched their highest in nearly three months after the U.S. Department of Agriculture said farmers planted 92.0 million acres of the feed grain this spring, which fell below a range of analyst expectations and was down 5 million acres from the agency’s March forecast.

“Your break-even equation says, ‘I have got to pay less for feeders, with corn going up the way it is,’” said Alan Brugler, president of Nebraska-based Brugler Marketing & Management.

Cattle futures found underlying support from signs that wholesale beef prices were stabilizing after recent weakness. Select beef cuts were up 76 cents at $201.47 per cwt in the USDA’s midmorning boxed-beef report, although the agency’s afternoon revisions showed an 81-cent decline, to $199.90 per cwt. Choice cuts ended down $1.39 on Tuesday afternoon, at $206.97 per cwt.

Meanwhile, the daily slaughter pace has returned to levels seen earlier this spring, before the coronavirus pandemic sickened workers at several U.S. packing plants, forcing some to shut down in April and May.

Cattle slaughter on Tuesday was estimated at 121,000 head, matching Monday’s kill as the highest daily slaughter since March. The hog slaughter reached 469,000 head, up 1,000 from Monday.

CME lean hog futures eked out modest gains on Tuesday, closing higher for a second session following a big sell-off last week after the USDA’s June 26 quarterly hog report showed a larger-than-expected U.S. hog herd.

CME August lean hogs settled up 0.575 cent Tuesday at 49.025 cents per pound. (Additional reporting by Julie Ingwersen in Chicago Editing by Sonya Hepinstall)