Cattle Rebound on Signs U.S. Beef Supply May Shrink; Hogs Rise

By Whitney McFerron

Oct. 7 (Bloomberg) -- Cattle rose for the first time in four sessions on signs that U.S. beef supplies are shrinking as ranchers sell animals sooner to slaughterhouses to avoid the risk of lower prices. Hogs gained after a 10-session slide.

The average weight of a steer sold to processors in the first two days of this week was down 6.3 percent from the same period last week, government data show. Cattle prices had dropped 9.1 percent since Sept. 24, and wholesale beef slid to a five-month low on Oct. 3 on concern a slumping economy would reduce meat demand.

``When the psychology is down like this, guys sell cattle early, since they think it's going to be worse in two or three weeks,'' said Lane Broadbent, a vice president at KIS Futures Inc. in Oklahoma City. ``You have people not overfeeding cattle.''

Cattle futures for December delivery rose 0.325 cent, or 0.3 percent, to 95.1 cents a pound on the Chicago Mercantile Exchange. Yesterday, the price fell by the exchange's limit of 3 cents to 94.775 cents, the lowest since May 9.

The average weight of a live steer sold to meatpackers was 1,288 pounds (584 kilograms) in the first two days of this week, down from 1,374 pounds in the same period a week earlier, according to the U.S. Department of Agriculture.

Beef Supply

Producers tend to feed animals more to fatten them longer, boosting the overall beef supply, when profit margins are better, Broadbent said.

``If a steer is on feed for 10 extra days, and it gains 3 pounds per day, that's 30 extra pounds of meat per head,'' Broadbent said. ``So it puts a lot more tonnage of meat on the market.''

Wholesale choice beef dropped 1.1 cents, or 0.7 percent, to $1.5506 a pound today, USDA data show. On Oct. 3, the price touched $1.5242, the lowest since April 18.

Feeder-cattle futures for November delivery rose 0.85 cent, or 0.9 percent, to 98.65 cents a pound. The price has dropped 13 percent in the past year.

Hogs rose for the first time since Sept. 22 on speculation that the lowest U.S. pork prices in five months spurred buying from overseas.

Wholesale pork fell 0.57 cent, or 0.8 percent, to 72.33 cents a pound today, USDA data show. That marked the lowest since April 24. The price has gained 20 percent in the past year.

``Export demand the previous two weeks had been slow, but there may have been a little pickup now just because the price is better,'' said Joe Kropf, an analyst at Joe Kropf & Sid Love Consulting Services Inc. in Overland Park, Kansas.

Hog futures for December settlement increased 1.6 cents to 61.425 cents a pound, ending the longest slide since Nov. 1. The 2.7 percent gain was the biggest for a most-active contract since Aug. 6. The price has climbed 6.1 percent this year.

To contact the reporter on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net.