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Sell-off hits cattle futures

04/15/2013 @ 11:16am

U.S. live-cattle futures are trading sharply lower Monday, hitting a nearly two-month intraday low for the front-month contract, amid weakness in many commodities markets.

April live-cattle futures recently were down 1.225 cents, or 1%, to $1.24625 a pound at the Chicago Mercantile Exchange, the lowest intrasession price since Feb. 20.

Most-active June futures were down 1.175 cents, or 1%, to $1.19575 a pound, a contract-life low for the June issue.

Feeder-cattle futures followed live-cattle lower. The April contract fell 1.2 cents, or 0.9%, to $1.3672 a pound. All other contracts were lower.

"It's a risk-off day for investors," said Elaine Johnson, an analyst with brokerage CattleHedging.com in Westminster, Colo.

Reports from China that indicated slower-than-expected growth and production have sparked selling across U.S. equity markets and in many commodities, such as gold and crude oil.

"Commodities have seen a lot of strength [in the past couple of years] because there was no return anywhere else," said Ms. Johnson, who added that the recent rallies in equities markets have pulled some investors away from commodities, which can be more risky.

That outside pressure is pushing most cattle futures lower, as traders weigh the possibility of weakened consumer demand for beef in a slow-growing U.S. economy.

Cattle prices have acted "contra-seasonally" this spring, said Ms. Johnson, due to persistent winter weather in much of the U.S., which has delayed the start of the spring grilling season when consumers purchase more beef and other meat products for barbecuing. The cold weather has also put a lid on demand for young beef cattle.

Cash-cattle traders will focus on assessing beef-demand signals while awaiting the week's show lists, which will reveal the number of animals available for sale.

No bids are expected to be established until Tuesday or possible even Wednesday, because processors have enough cattle for this week's operations.

Last week's trading was scattered across three days, with the bulk of the sales in the south completed on Wednesday. A few more trades occurred there on Thursday, along with light sales on a live basis in Nebraska. On Friday, more active dressed trading in Nebraska occurred along with some sales in Iowa.

Prices last week in the south were at mostly $1.27 a pound live, down one cent in Texas and one to 1-1/2 cents in Kansas from a week earlier. In Nebraska, live sales were from $1.27 to $1.28, off mainly one cent, while dressed sales were at mainly $2.02 a pound, down two to three cents a pound from the previous week.

The U.S. Department of Agriculture reported beef prices were mixed Friday. Choice was down 63 cents a hundredweight at $189.52, the lowest since March 29. Select rose 15 cents to $184.14. The load count for beef sales was 125. Prices in both grades were lower for the week.

The latest HedgersEdge packer margin index was at minus $62.70 per head, compared with minus $53.55 the previous day. This is an estimate of packer returns on cattle slaughtered and processed expressed in the form of an index.

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