LIVESTOCK-US feeder cattle futures sink to 5 1/2-month low

Wed Feb 13, 2013 4:06pm EST
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* Sagging live cattle exert more feeder cattle pressure
    * Live cattle futures drop on cash sentiment, fund selling
    * Feb hogs firm, others slip with cattle market losses

    By Theopolis Waters
    CHICAGO, Feb 13 (Reuters) - Chicago Mercantile Exchange
feeder cattle futures on Wednesday sank to a 5 1/2-month low
pressured by sagging live cattle futures and lower prices for
younger cattle, said analysts and traders. 
    CME feeder cattle losses spanned eight consecutive
sessions, tying a similar losing streak set in October 2009.
    March ended 1.900 cents per lb lower at 141.350
cents. April closed at 144.950 cents, down 2.200 cents.
    "Feeders are too expensive compared to live cattle. Feedlots
have been losing massive amounts of money and one of the reasons
is feeder cattle are too high," said A&A Trading broker Jim
    Unrelenting drought in the U.S. Plains pushed corn prices to
all-time highs last summer and trimmed the cattle herd to the
smallest in 61 years, driving up feeder cattle values.
    Feedyards, which fatten young cattle for sale to packers, in
January on average lost $175 per head on cattle compared with
$121 losses in December, according to the Denver-based Livestock
Marketing Information Center.
    The price for feeder cattle, young steers weighing roughly
600 to 800 lbs, fell $3 to $4 per cwt on Tuesday at the
most-watched Oklahoma City market as feedlot buying interest
    CME live cattle finished lower, weighed by more fund
liquidation and expectations for steady-to-lower prices for
unsold cattle in the cash market, traders and analysts said.
    Traders also cited mixed rather than higher wholesale beef
prices in the midst of a seasonal lull in demand.
    Spot February settled down 0.550 cent per lb to
125.500 cents. The most-active April ended 0.550 cent
lower at 129.400 cents.
    Prior to a few weeks ago, futures' premiums were justified
because of tighter cattle numbers outlook due to back-to-back
drought, said senior analyst John Kleist.   
    "Now, people are trying to get rid of that premium because
beef demand has fallen apart," he said.
    So far, a small number of cash-basis cattle in the U.S.
Plains traded at $123 per cwt, down $2 from last week, feedlot
sources said. 
    Packer bids for remaining cattle stood at $122 to $123
against $125 to $127 asking prices from sellers, they said.
    Some processors are expected to cut slaughter rates and
curtail cash spending to improve their margins and stabilize
volatile wholesale beef values.
    The U.S. Department of Agriculture showed the price for
wholesale choice beef on Wednesday morning at $183.57 per cwt,
up 12 cents from Tuesday; select cuts slipped 24 cents to
$179.06. put the average beef packer margin for
Wednesday at a negative $73.95 per head, compared with a
negative $78.50 on Tuesday and a negative $62.10 on Feb. 6.   
    Spot February CME hog futures closed up 0.225 cent
per lb at 87.475 cents. The spot month drew support from
generally steady cash hog prices and its discount to CME's lean
hog index at 90.17 cents.
    CME's cattle market selloff spilled over into remaining hog
futures, said traders and analysts. And packers may soon lower
cash hog bids and reduce slaughters to realign their margins.
   Most-active April ended at 85.800 cents, 0.200 cent
lower and June closed down 0.100 cent down at 94.150
    The average pork packer margin for Wednesday was a negative
$9.50 per head, compared with a negative $12.55 on Tuesday and a
negative $13.75 on Feb. 6, said
    "Packer margins are not all that good right now but pork is
very cheap in my opinion," said independent livestock futures
trader Dan Norcini.
     Processors should begin stocking up on hams for Easter
demand soon, which could help wholesale pork values, he said.