Cattle Drop as Lower Beef Prices Signal Demand Slump; Hogs Fall

Cattle futures fell to the lowest level in five weeks as wholesale-beef prices slipped, signaling consumers may be slowing purchases as the economy slumps. Hogs also dropped.

Wholesale choice beef fell to $1.4002 a pound at midday, the lowest since Oct. 23, government data show. Traders may expect spot-market cattle prices to slide as wholesale beef drops, said Chad Henderson, a market analyst with Prime Agricultural Consultants Inc. in Brookfield, Wisconsin. The U.S. jobless rate rose to a 26-year high of 10.2 percent last month.

“Everyone wants to be bullish on the economy and look at the equity markets move up, but the bottom line is, consumers don’t have money,” Henderson said. “The consumer is going to look for the cheapest item, not the most expensive, and beef is higher priced, especially compared to pork.”

Cattle futures for December delivery fell 0.95 cent, or 1.1 percent, to 83.65 cents a pound on the Chicago Mercantile Exchange. Earlier, the price touched 83.45 cents, the lowest since Oct. 7. Feeder-cattle futures for January settlement declined 1.25 cents, or 1.3 percent, to 93.475 cents a pound.

Spot-market cattle may trade for 85 cents a pound this week, compared with about 87 cents or 88 cents a pound last week, Henderson said.

Consumers may cut beef purchases as they save money for end-of-the-year holiday celebrations, said Mark Schultz, a vice president at Northstar Commodity Investments LLC in Minneapolis. The meat was about 82 cents a pound more expensive than pork yesterday, according to USDA data.

‘Anemic’ Demand

“Movement of beef the last three or four weeks has been rather anemic,” Schultz said. “It has a lot to do with the holidays and people cutting back a little more, although we’re not even moving beef quite as well as we did this time last year.”

Hog futures for December settlement declined 0.025 cent to 55.6 cents a pound. The most-active contract has dropped 8.7 percent this year.

Wholesale pork slid 1 percent yesterday to 58.18 cents a pound, the lowest price since Oct. 28, according to the USDA.

Hog futures may still rebound as the U.S. herd contracts, limiting pork supplies, Schultz said.

Coharie Hog Farm Inc., a Clinton, North Carolina-based producer, filed for Chapter 11 bankruptcy on Nov. 6. The company intends to sell its 30,000 sows and 280,000 weaned pigs during the next six months, according to court filings.

Hog Industry Losses

Describing how the entire swine industry “currently teeters on the edge of disaster,” Coharie said in a court filing that the loss of $20 on every hog sent to market in 2008 rose to $29 a hog this year. Last year, losses were attributable to the high cost of feed. This year, consumer fear of contracting swine flu led to decreased consumption of pork.

U.S. hog farmers have lost $5.4 billion over the past two years, the National Pork Producers Council said in a statement today. The outbreak of swine flu among humans began in April. The virus isn’t transmitted through properly handled meat.

Source: Bloomberg