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Cattle Drop by Exchange Limit as Cargill Idles Texas Beef Plant

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Jan. 17 (Bloomberg) -- Cattle fell by the exchange-limit to a two-month low after Cargill Inc. said it will idle a beef-processing plant, signaling lower demand for animals. Feeder cattle also slumped the most allowed by the exchange.

The beef-processing plant in Plainview, Texas, will stop production at the close of business on Feb. 1 because of a reduction in cattle supply brought on by years of drought in the U.S. South, Minneapolis-based Cargill said today in a statement.

“For the last two years, there has been overcapacity in the industry, and packers had to bid artificially high in order to secure their daily needs,” Rich Nelson, the chief strategist at Allendale Inc. in McHenry, Illinois, said in a telephone interview. “Without this significant plant in the panhandle running, there will be fewer buyers to fill the remaining plants.”

Cattle futures for April delivery fell 1.4 percent to settle at $1.30875 a pound at 1 p.m. on the Chicago Mercantile Exchange, after falling by the 3-cent exchange limit to $1.297, the lowest for the most-active contract since Nov. 16.

Feeder-cattle futures for March settlement declined 1.6 percent to close at $1.4585 a pound on the CME, after dropping by the 3-cent exchange limit to $1.45225, the lowest since Dec. 4.

Hog futures for April settlement rose 0.7 percent to close at 88.075 cents a pound in Chicago.

Wholesale pork climbed 0.6 percent to 84.25 cents a pound yesterday, the highest since Dec. 11, U.S. Department of Agriculture data show. U.S. pork output will total 5.725 billion pounds (2.6 million metric tons) this quarter, down 8.3 percent from the prior three months, the USDA estimates.

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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