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Feeder Cattle Fall as High Grain Costs Curb Demand

Feb. 8 (Bloomberg) -- Feeder-cattle futures dropped the most in three weeks on speculation that demand will ebb as high U.S. grain costs discourage purchases of the animals. Cattle and hogs also fell.

Feedlots, which buy cattle and raise them on mostly grain until they are fat enough to sell to beef processors, will have “slightly negative” profit margins in 2013 because of high costs, Michael Swanson, an agricultural economist at Wells Fargo & Co., said on Feb. 6. Beef demand is expected to drop 2 percent this year, partly on lower consumer income, Cattlefax said today.

“With the feeders losing money, they’re sick of paying up for the feeder cattle,” Lane Broadbent, a vice president at KIS Futures Inc. in Oklahoma City, said in a telephone interview. “They also know there’s going to be some cattle coming in off of pastures soon.”

Feeder-cattle futures for March settlement fell 1.5 percent to settle at $1.45 a pound at 1 p.m. on the Chicago Mercantile Exchange, the biggest decline for a most-active contract since Jan. 17. The price dropped 2.8 percent this week.

Cattle futures for April delivery slid 1.1 percent to $1.30125 a pound, the biggest decline since Jan. 17.

Russia is set to ban on U.S. beef imports effective Feb. 11, marking a “significant” loss for U.S. producers and exporters, Philip Seng, the chief executive officer of the U.S. Meat Export Federation, said yesterday.

Hog futures for April settlement dropped 0.5 percent to 86.125 cents a pound in Chicago. This week, the price tumbled 3 percent, the most in two months.

To contact the reporter on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net

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

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