Cattle Rise as Beef Gains May Boost Packer Profits; Hogs Fall

Cattle futures rose for the third straight day on bets that U.S. meatpacker demand for animals will increase as profit margins improve. Hogs fell from a 12- year high.

Wholesale choice beef climbed 0.3 percent at midday to $1.6396 a pound, extending a rally to the highest level since August 2008, according to U.S. Department of Agriculture data. Meatpackers have processed 377,000 cattle this week, 3 percent more than last week. Packers may pay more for cattle for immediate delivery as rising meat prices boost profit.

“If the packer wants to bid up, he has the margins for that now,” said Chad Henderson, a market analyst with Prime Agricultural Consultants Inc. in Brookfield, Wisconsin.

Cattle futures for June delivery rose 0.375 cent, or 0.4 percent, to 93.55 cents a pound on the Chicago Mercantile Exchange. The most-active contract was up 8.6 percent in the first quarter.

Feeder-cattle futures for May settlement jumped 2 cents, or 1.8 percent, to $1.12975 a pound, capping a 17 percent gain this quarter. The price rallied as corn costs dropped after a government report showed the largest U.S. inventories for March since 1987.

“Any time you’re down in grains, feeder cattle should have the upper hand,” said Mark Schultz, the chief analyst at Northstar Commodity Investment Co. in Minneapolis. Cheaper livestock feed often spurs herd expansion.

Hogs Fall

Hog futures for June settlement fell 0.15 cent, or 0.2 percent, to 82.9 cents a pound. Earlier, the price touched 84.25 cents, the highest level for a most-active contract since May 1997. The June contract was up 7.3 percent in the first quarter.

Traders sold contracts to take advantage of prices that have climbed 6.2 percent since March 26, Schultz said. On that date, the USDA reported that the sow herd shrank to the smallest size on record as extended losses forced farmers to cull pigs.

Hogs have had “a pretty good rally,” Schultz said. “Some guys were selling on the up move just to take some money.”

Wholesale pork fell 0.2 percent to 72.76 cents a pound today after jumping 3.1 percent in the previous two days. Meatpackers shipped 7.15 million pounds (3,243 metric tons) of pork yesterday, the most since June.

Whitney McFerron
Source: Bloomberg