Cattle Rise as Corn-Futures Rally May Slow Herd Expansion; Hogs Advance

Cattle futures rose for the second time in three days as higher livestock-feed costs raised speculation that herd expansion will slow. Hogs also gained.

Corn, the main feed ingredient, rose to a 23-month high today after the U.S. Department of Agriculture said the crop will be smaller than forecast a month ago. Feedlots cut purchases of young cattle in July by 5.9 percent from a year earlier, according to the most-recent USDA data. On July 1, the cattle herd was the smallest for the date since at least 1973.

“Higher grains ultimately will up your break-evens on cattle,” said Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa.

Cattle futures for October delivery rose 0.225 cent, or 0.2 percent, to 97.125 cents a pound at 11 a.m. on the Chicago Mercantile Exchange. Before today, the most-active contract gained 12 percent this year as supplies dropped and beef demand recovered from the recession.

Feeder-cattle futures for October settlement gained 0.1 cent to $1.1185 a pound. The price declined 4.9 percent in the two weeks through yesterday, and traders may have higher corn prices already “dialed in,” Roose said.

Beef Exports

Prospects for increasing global beef demand also boosted futures, said Troy Vetterkind, the owner of Vetterkind Cattle Brokerage in Chicago.

The U.S. may export 2.15 billion pounds of beef next year, or 3.9 percent more than forecast last month, the USDA said today. Production may total 25.217 billion pounds, down 0.1 percent from the previous estimate, the government said.

The USDA “lowered beef production estimates for next year because of higher feed-grain costs, and they lowered imports and increased exports,” Vetterkind said. “All that’s certainly going to be positive for the market.”

In the first seven months of 2010, the U.S. shipped 17 percent more beef than a year earlier, the USDA said today in a separate report.

Hog futures for October settlement rose 0.15 cent, or 0.2 percent, to 77.5255 cents a pound. Earlier, the price reached 78.05 cents, the highest level since Aug. 25. Before today, the commodity climbed 18 percent this year.

Hogs were supported by gains in the spot market, U.S. Commodities’ Roose said. The CME’s Lean Hogs Index, a cash- market gauge, traded for 81.86 cents a pound today, about 4 cents premium to October futures.

To contact the reporter on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net.

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