U.S. livestock: CME live cattle sink ahead of USDA feedlot data

CME February 2020 live cattle with 20-, 50- and 100-day moving averages. (Barchart)

Chicago | Reuters — U.S. live cattle futures fell to a one-week low and feeder cattle futures hit a six-week low on Friday ahead of a U.S. Department of Agriculture report that traders expected would show a hefty year-on-year increase in the number of cattle placed in feedlots last month.

February live cattle futures on the Chicago Mercantile Exchange (CME) settled down 1.2 cents at 123.85 cents/lb., with front-month December down 0.65 cent at 118.675 cents (all figures US$).

CME January feeder cattle futures tumbled 3.325 cents to close at 139.275 cents/lb. after dipping to 138.275, the contract’s lowest since Oct. 9.

Ahead of USDA’s report, analysts surveyed by Reuters on average expected the government to report the number of cattle placed in U.S. feedlots during October at about 2.5 million head, up 11.4 per cent from a year earlier. The average estimate for the total number of cattle on feed as of Nov. 1 was 11.8 million head, up 1.1 per cent from a year ago.

In its report, which was released shortly after the CME close, USDA reported October placements in feedlots at 2.477 million head, up 10 per cent from a year ago but just below the average trade estimate.

USDA put the total number of cattle on feed at 11.831 million head, in line with the average trade estimate.

“The expectation of a bearish report had a good deal to do with the (futures) sell-off today,” Brock Associates analyst Doug Houghton said. “The (USDA) report was not as bad as the average estimates would suggest, but … it is still fundamentally bearish to have placements up over 10 per cent, and to have the on-feed number up over year-ago,” Houghton said.

Separately, in its monthly cold storage report, USDA reported U.S. frozen stocks of beef at 466.2 million lbs. as of Oct. 31, down 10 per cent from a year earlier.

CME lean hog futures closed narrowly mixed, with the benchmark February contract settling modestly higher for a second straight day following a six-session slide.

Most-active February lean hogs closed up 0.2 cent at 67.65 cents/lb. but ended the week down about six per cent, pressured by uncertainty about prospects for a U.S.-China trade deal.

China has ramped up its imports of meat from global supplies over the last year as it struggles with African swine fever, a deadly animal disease that has slashed the size of the world’s largest hog herd.

But China’s imports of U.S. pork have been slowed by steep tariffs that Beijing imposed last year as part of the countries’ trade war. A trade deal would likely open the door for increased pork shipments to Asia.

Underscoring the need for strong U.S. pork exports, USDA reported frozen stocks of pork bellies at 45.92 million lbs., up 72 per cent from a year ago.

“What we are seeing is no shortage of domestic pork, either in cold storage or on the hoof,” said Don Roose, president of Iowa-based U.S. Commodities.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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