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Cattle Gain as U.S. Meatpacker Demand May Increase; Hogs Drop

June 2 (Bloomberg) -- Cattle futures rose the most in a month on speculation that U.S. meatpackers will increase purchases amid shrinking supplies. Hogs declined.

Beef demand may climb this week as grocers refill freezers following the U.S. Memorial Day holiday, when many consumers grilled outdoors, said Lane Broadbent, a vice president at KIS Futures Inc. in Oklahoma City. Spot-market steer prices may rise as much as 2 cents a pound this week, he said. A benchmark price in Nebraska was little changed at 94 cents yesterday.

“Domestic demand seems to be improving a little bit,” Broadbent said. “These packers are still making money on these cattle, so there’s a big incentive for them to keep the kill coming.”

Cattle futures for August delivery rose 1.125 cents, or 1.3 percent, to 90.75 cents a pound on the Chicago Mercantile Exchange, the biggest gain since May 3. The commodity has climbed 13 percent in the past year after feedlots lost money in 2008 and 2009, spurring herd reductions.

Yesterday, futures were more than 4 cents below the cash market and may be too cheap, said Brian Hoops, the president of Midwest Market Solutions in Yankton, South Dakota. The U.S. feedlot herd in April was 3.4 percent smaller than a year earlier, government data showed.

“We’re seeing a little better bids than what we saw from packers last week, and that’s giving us a bump in the cattle market,” Hoops said.

Feeder-cattle futures for August settlement advanced 0.175 cent, or 0.2 percent, to $1.0965 a pound.

Hog Market

Hog futures for July settlement fell 0.575 cent, or 0.7 percent, to 82.175 cents a pound.

The dollar approached a four-year high today against the euro, before paring gains. Importers may favor European pork over shipments from the U.S., said David Kruse, a commodity trading adviser at CommStock Investments Inc. in Royal, Iowa. The U.S. is the world’s largest exporter of the meat, followed by the European Union.

“We’re going to have to sort out the macro-market currency impact on pork demand,” Kruse said. “It would appear that EU pork is going to be cheaper than U.S. pork.”

In March, U.S. pork exports were little changed from a year earlier, according to the most-recent USDA data. About 23 percent of U.S. pork production was exported in 2009, compared with 10 percent of beef production, according to the U.S. Meat Export Federation, a Denver-based trade group.

Hogs dropped 4.3 percent last month as the dollar climbed 5.8 percent against a basket of six currencies including the euro.

Futures also declined as spot-market prices fell to a seven-week low yesterday of 75.03 cents a pound, government data show. Wholesale pork rose 0.4 percent yesterday to 87.16 cents a pound after dropping to a five-week low on May 28.

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

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.

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