Cattle Futures Jump to Record, Hogs Surge as South Korea Widens Herd Culls
Cattle Rise to Record, Hogs Gain as South Korea Culls
Gary Fandel/Bloomberg
Cattle stand in a pasture on the beef cattle farm of Tanner Rowe outside of Dallas Center, Iowa.
Cattle stand in a pasture on the beef cattle farm of Tanner Rowe outside of Dallas Center, Iowa. Photographer: Gary Fandel/Bloomberg
Jan. 18 (Bloomberg) -- David Stroud, chief executive officer of TS Capital, discusses commodity prices. Stroud speaks with Deirdre Bolton on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Cattle futures rose to a record and hog prices rallied on bets that U.S. meat exports will climb because of disruptions to global supplies.
South Korea has destroyed almost 2 million pigs and cattle, or 16 percent of the herds and the biggest cull in its history, after the nation’s worst outbreak of foot-and-mouth disease was reported in November. In that month, U.S. pork and beef exports rose to the highest since 2008, according to the most-recent government data.
“The futures market is signaling that we’re going to have higher meat values,” said Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa. “We’ve got upward pressure on the consumer’s pocketbook on food.”
Global food costs jumped 25 percent last year to an all- time high in December, according to the United Nations, and governments from Beijing to Belgrade are boosting imports, limiting sales or releasing inventories to curb inflation. Commodities will keep rising, according to a Bloomberg survey of more than 100 analysts and traders.
U.S. food inflation will gain as much as 3 percent this year, the Department of Agriculture forecast. More-expensive meat may spur restaurants to pass along costs to consumers. Last week, Texas Roadhouse Inc. said it plans to boost menu prices, and Ruth’s Hospitality Group Inc., the owner of upscale steakhouses, projected “headwinds” in the beef market this year.
Cattle futures for April delivery closed unchanged at $1.1375 a pound at 1 p.m. on the Chicago Mercantile Exchange. Earlier, the price reached $1.166, the highest for a most-active contract since the commodity began trading in 1964. The wholesale cost of choice beef has climbed to a 30-month high.
Hog Futures
Hog futures for April settlement rose 1.45 cents, or 1.7 percent, to settle at 86.725 cents a pound. The price has gained 18 percent in the past year.
U.S. exporters shipped 215.6 million pounds (97,800 metric tons) of beef in November, the highest since August 2008, and pork exports were 406.2 million pounds, the highest since June 2008, according to USDA data.
“Bullishness about the export outlook has played a big role in boosting” livestock markets, said Dan Vaught, the owner of Vaught Futures Insights in Altus, Arkansas.
South Korean demand for U.S. imports may jump because of the disease outbreak. In the 11 months ended Nov. 30, South Korea imported 250 million pounds of beef and 192.2 million pounds of pork, according to USDA data.
‘Completely Paralyzed’
“The movement of animals is completely paralyzed,” said Dennis Smith, a senior account executive at Archer Financial Services Inc. in Chicago. “They basically are not producing any meat for their retail counters. They’re going to have to come to other people, primarily us.”
Flooding in Australia “has crippled their beef industry,” Troy Vetterkind, the owner of Vetterkind Cattle Brokerage in Chicago, said in a report.
The U.S. producer-price index rose 1.1 percent in December from November, the most in 11 months, led by rising commodities including fuel and food, Labor Department data showed Jan. 13.
Today, wholesale choice-beef prices advanced 0.6 percent to $1.7259 a pound, the highest since July 14, 2008, government data showed. Yesterday, pork rose 0.9 percent to 84.93 cents a pound, the highest since Oct. 5.
“The American consumer is going to have to put up with higher prices,” George Richter, the chief operating officer of Smithfield Foods Inc., the world’s largest pork processor, said today on a conference call with investors. “I don’t know how high.”
Dollar Drops
The Thomson Reuters/Jefferies CRB Index of 19 raw materials rose as much as 0.7 percent today. The dollar dropped to the lowest since Nov. 22 against a basket of major currencies, boosting the appeal of U.S. exports.
“You’ve got a market that’s just commodity friendly,” Roose of U.S. Commodities said. “You’ve got a weaker dollar. You’ve got new fund buying at contract highs.”
Feeder-cattle futures for March settlement rose 0.65 cent, or 0.5 percent, to $1.2795 a pound. Earlier, the price reached $1.30025, the highest since the commodity started trading in 1971.
Hedge funds are the most bullish on feeder-cattle futures since at least 2006, signaling that speculators may expect tight supplies of the animals to boost prices.
To contact the reporter on this story: Elizabeth Campbell in Chicago at ecampbell14@bloomberg.net
To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.
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