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Cattle Futures Drops as U.S. Supply Increases; Hog Prices Fall

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Sept. 22 (Bloomberg) -- Cattle futures fell the most in two weeks on concern that supplies available to U.S. beef processors will increase. Feeder cattle dropped to the lowest price since June, and hogs declined.

Cattle purchases by U.S. feedlots jumped 7.1 percent last month from a year earlier, adding 2.27 million head to herds, the most of any August since 2006, the U.S. Department of Agriculture said Sept. 17. Cattle prices in Chicago have fallen every day since the report, dropping 3.7 percent.

“That’s where the aftershock is coming” from, the unexpected feedlot expansion, said Paul Beere, a market adviser at Prime Agricultural Consultants Inc. in Brookfield, Wisconsin.

Cattle futures for December delivery fell 1.85 cents, or 1.8 percent, to 98.2 cents a pound at 2:06 p.m. on the Chicago Mercantile Exchange. That’s the biggest decline since Sept. 7. Earlier, cattle slid to 98.1 cents, the lowest price for a most-active contract since Sept. 9. Futures have jumped 14 percent this year.

Feeder-cattle futures for November settlement dropped 1.325 cents, or 1.2 percent, to $1.097 a pound on the CME, after reaching $1.09275, the lowest level for a most-active contract since June 10. The commodity has gained 14 percent this year.

“Feeders are in a tough spot,” said Dennis Smith, a senior account executive at Archer Financial Services Inc. in Chicago. The rising corn prices are “a major factor against the feeder market” and are pressuring prices, he said.

Corn futures have climbed 22 percent this year, touching $5.2375 a bushel on Sept. 20, the highest level for a most-active contract since Sept. 30, 2008.

Hogs Decline

Hog futures for December settlement fell 0.75 cent, or 1 percent, to 76.325 cents a pound in Chicago.

Wholesale pork fell 0.5 percent to 90.98 cents a pound, USDA data show. Hog futures have climbed 16 percent this year and pork prices soared 35 percent.

“I’m expecting some more weakness” from pork prices “that will eventually translate into weakness in the cash-hog market,” Smith said. “I’m expecting a defensive trade as far as the hog-futures markets go.”

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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