Chicago Mercantile Exchange live cattle futures on Friday dipped on profit-taking, a day after surging to a three-month high after Tyson Foods said it would no longer buy cattle given the feed additive Zilmax, traders and analysts said.
In a letter to feedlot operators, Tyson Foods, the country’s largest meat processor, said it will suspend purchases of cattle given the growth additive Zilmax, starting Sept. 6. Tyson said it made the decision after some cattle arrived at its plants having trouble walking, possibly because of the added weight.
Since then CME live cattle traders bought deferred-month contracts on the view that cattle raised without the additive would be lighter, which could drive up beef prices.
“It appears to us that the market is overreaching to an anticipated tonnage reduction,” said Hales Cattle president David Hales.
He noted that other packers will still process Zilmax-fed cattle, or else switch to Optaflexx, another growth enhancer.
Still, the thinly traded 2014 contracts retained a slight portions of the gains notched this week.
“Even if those weights come down just a hair from packers not using Zilmax, we’re going to have tighter cattle numbers which means less beef because of last year’s drought,” a trader said.
Recent futures’ advances drove expectations for higher cash cattle prices this week.
Cash cattle bids in the Southern Plains stood at $117 per hundredweight (cwt), with no response from sellers, feedlot sources said (all figures US$).
Last week, cash cattle in Texas traded at $119/cwt and mostly at $119 in Kansas, with some at $120/cwt. A week ago most live-basis cattle in Nebraska sold at $120.50.
The U.S. Department of Agriculture on Friday morning quoted the wholesale price of choice beef at $188.49/cwt, up 18 cents from Thursday. Select cuts were down 10 cents to $181.95.
August live cattle futures ended down 0.175 cents at 122.5 cents/lb. October closed 0.2 cent lower at 126.875 cents.
CME feeder cattle prices were pressured by profit taking and live cattle market weakness.
August feeders closed at 153.850 cents, down 0.4 cent/lb., while September closed at 157.475 cents, 0.35 cent lower.
Profit-taking weakens hogs
Profit-taking amid mixed cash hog prices and flat wholesale pork values pulled down CME hogs, traders and analysts said.
USDA data Friday morning showed the wholesale pork price, or cutout, at $105.87/cwt, down three cents from Thursday.
Some packers have all the hogs they need heading into the weekend with others buying supplies for early next week, a trader said.
The seasonal decline in hog numbers caused a major pork processor to schedule time off for employees on Friday, according to traders and analysts.
Packers on Friday processed 378,000 head of hogs, which was 23,000 fewer than last week and down 32,000 from a year ago, according to USDA data.
Spot August hogs closed at 100.525 cents/lb., or down 0.1 cent. Most-actively traded October ended at 84.975 cents, or 0.275 cent lower.
— Theopolis Waters reports for Reuters from Chicago.