LIVESTOCK-US live cattle futures slump on Cargill news

Thu Jan 17, 2013 5:56pm EST
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* Cargill to shut Texas beef plant on Feb. 1
    * Lower cash, wholesale beef prices weigh
    * Live cattle selloff sinks feeder futures
    * Hog contracts climb as cash prices surge

    By Theopolis Waters
    CHICAGO, Jan 17 (Reuters) - Chicago Mercantile Exchange live
cattle futures fell hard Thursday on news that Cargill Inc
 plans to close its beef packing plant in Plainview,
Texas, on Feb. 1 due to tight supplies, traders and analysts
    CME live cattle futures at one point fell by their 3-cent
daily price limit, but recovered some of those losses later in
the session.
    "The U.S. cattle herd is at its lowest level since 1952.
Increased feed costs resulting from the prolonged drought,
combined with herd liquidations by cattle ranchers, are severely
and adversely contributing to the challenging business
conditions we face as an industry," John Keating, president of
Cargill Beef, said in a statement. 
    Spot February closed at 126.600 cents per lb, down
1.925 cents, or 1.5 percent. April ended down 1.825
cents, or 1.38 percent, at 130.875 cents.
    "It was a case of shoot first and ask questions later,"  Oak
Investment Group president Joe Ocrant said in response to what
he called futures' overreaction to news of the plant's closing.
    There was nothing overly bearish about Cargill's
announcement, said Ocrant. It confirmed what people knew all
along, that cattle numbers are the lowest in 60 years because of
drought, he said.
    David Hales, president of Hales Trading Co, characterized
Thursday's selloff as "panic selling" driven by the belief that
the plant closing would create a surplus of cattle, allowing
packers to buy them cheaper.
    "That line of reasoning would only be true if packers were
killing at full capacity, and that's not the case," said Hales.
    CME live cattle futures' sellers outnumbered buyers after
grocers showed interest in buying beef only at lower prices.
    The price for wholesale choice beef Thursday was $192.20 per
cwt, $1.63 per cwt lower than Wednesday, with sales volume of
215 loads. It was the most for a Thursday since 217 loads on
Dec. 27, according to the U.S. Department of Agriculture.
    Investors were still reeling from this week's lower cash
cattle values as processors reduced spending to realign their
    Cash cattle in the U.S. Plains fetched $124 to $125 per cwt,
compared with $125 to $128 last week, feedlot sources said. put the average beef packer margin for
Thursday at a negative $36.95 per head, compared with a negative
$46.90 on Wednesday and a negative $66.75 on Jan. 10.
    CME feeder cattle moved lower for an eighth consecutive day,
in sympathy with the steep drop in the live cattle market.
    January ended 2.675 cents per lb lower, or down 1.82
percent, at 144.400 cents. Most-actively traded March 
finished at 145.850 cents, down 2.375 cents, or 1.6 percent.
    Hog futures rallied with stronger cash hog prices that
sparked short-covering, traders and analysts said.
    Packers bolstered inventories before the weekend and ahead
of the Martin Luther King Jr. holiday on Monday, one trader
    Hog supplies have already tightened seasonally and are
expected to get even harder to come by when colder weather moves
into the U.S. Plains by Monday, he said.
    Chilly temperatures slow animal weight gains, limiting
supplies available to packers. Some farmers may keep doors to
confinement buildings closed to retain heat.
    The government on Thursday showed the average hog price in
the most-watched Iowa/Minnesota market at $86.66 per cwt, $1.82
higher than Wednesday.
    Spot February hogs settled 0.800 cent per lb higher,
or up 0.88 percent, at 85.950 cents. Most-active April 
ended at 88.075 cents, 0.650 cent higher, or up 0.74 percent.