By Sam Nelson
CHICAGO, May (Reuters) – Chicago Mercantile Exchange feeder cattle futures rose on Friday, led higher by deferred contracts, on expectations for lower cattle feed costs following a government forecast for a big build in corn supplies, traders and analysts said.
The U.S. Department of Agriculture, in its May supply and demand report released on Friday, forecast a 164 percent increase in the supply of corn next year in the United States due to an expected record crop of over 14.0 billion bushels.
Chicago Board of Trade corn futures prices fell two percent on Friday due to the forecast for a big buildup of corn stocks from a 16 year low this summer to a nine-year high when the new-crop harvest begins this fall.
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“In feeders, from August on out, the report was bullish because it is saying there should be some cheaper corn and cheaper feed once the cattle are placed on feed later this year,” said Dennis Smith a broker for Archer Financial.
CME August feeder cattle were up 0.650 cent per pound at 146.625 cents per lb. and feeders for delivery in September were up 0.975 at 148.825 cents per lb.
RECORD HIGH BEEF SUPPORTS CATTLE
Most live cattle futures ended firm as well on the brighter prospects for feeding cattle and on continued jumps to record highs in the wholesale beef market.
“Beef continues going up so it looks like the demand for beef is still out there,” said Jack Salzsieder, analyst for K&S Financials.
Spot June was down 0.100 cent at 120.450 cents per lb. but the decline was slowed due to chart-based signals.
“Cattle futures are oversold and there is technical support in the June contract at the 120 level. They’ve bounced off that level three times,” said Sterling Smith, futures specialist for Citigroup.
Some overhanging pressure was on cattle futures because of a late week sag in cash cattle and on concern the high beef prices might begin to cut into consumer buying of choice beef cuts just ahead of the summer grilling season.
“Cash cattle were lower this week so that may bring in a little selling. That and McDonald’s dropped their third pound Angus beef burger because of high prices,” Salzsieder said.
McDonald’s Corp said on Thursday it is phasing out one-third pound Angus burgers from U.S. menus, an anticipated move that comes shortly after U.S. beef prices hit a 10-year high.
The USDA’s wholesale boxed beef market report on Friday showed choice beef carcasses up six cents per hundredweight at a fresh record high $205.55 per cwt.
Live cattle for August delivery were up 0.250 cent at 120.775 cents per lb.
Gains in cattle were restrained by bearish data in the USDA’s supply/demand report released on Friday.
“The report for meat supply-demand was probably a little bearish for cattle futures. USDA increased beef production for this year 227 million lb. and that’s due to the heavier cattle coming to market,” said Archer’s Smith.
The USDA pegged this year’s production of beef at 25.107 billion lb. versus 24.880 billion in its April report.
In its first outlook for 2014 production, USDA forecast beef production at 24.105 billion lb.
“They forecast a four percent decline next year in beef production but increased hog production 2.5 percent and increased broiler production three percent,” he said.
HOGS HAMPERED BY SEASONAL CONSIDERATIONS
CME lean hog futures turned lower on expectations for a seasonal decline in pork markets and a steadier tone to cash hog markets on Friday than seen earlier in the week.
Cash hogs traded $1 per cwt. higher in the eastern U.S. Midwest on Friday while prices held steady in the western part of the region as packers bought animals for next week’s slaughter needs, dealers said.
Some packers were reducing slaughter due to poor profit margins.
Lean hogs for June delivery were down 0.075 cent at 90.500 cents per lb. and for July down 0.325 at 90.900.
The government’s supply-demand report on Friday indicated waning export sales of U.S. pork.
“USDA revised down its estimate for pork exports by 177 million lb. and that’s not good news for hogs,” Archer’s Smith said.
USDA on Friday forecast U.S. pork exports for this year at 5.028 billion lb. versus 5.205 billion in its April report.
In its first outlook for 2014, USDA pegged pork exports at 5.255 billion lb.
