Cattle Drop to 2-Year Low as Beef Demand May Slow; Hogs Gain

By Whitney McFerron

Nov. 19 (Bloomberg) -- Cattle prices fell to a two-year low and feeder cattle slid to the lowest since 2004 on speculation that the slumping global economy will curb demand for U.S. beef. Hog futures climbed.

Construction started on new homes last month at the slowest annual pace on record, the U.S. Commerce Department said today, a sign that the housing slump may extend into a fourth year. Consumers may spend less money on beef as the economy stumbles and they have less disposable income, said Lane Broadbent, a vice president at KIS Futures Inc. in Oklahoma City.

``The economy is lower, and expectations that the live- cattle market was going to get better have gotten killed here the last four or five days,'' Broadbent said. ``Beef demand may slow down.''

Cattle futures for February delivery fell 2.45 cents, or 2.8 percent, to settle at 85.15 cents a pound on the Chicago Mercantile Exchange. The price later touched 84.675 cents, the lowest since Nov. 8, 2006. The most-active contract has tumbled 8.1 percent this month.

Feeder-cattle futures for January delivery dropped 1.4 cents, or 1.5 percent, to 89.85 cents a pound in Chicago. Earlier, the price touched 88.35 cents, the lowest for a most- active contract since April 12, 2004. The price has slipped 8.4 percent this month.

Wholesale choice beef rose 0.51 cent, or 0.3 percent, to $1.58 a pound at midday today, the highest price since Sept. 25, the U.S. Department of Agriculture said. The price has gained in 14 of the past 15 sessions and is up 11 percent this month.

Smaller Supply

Beef prices have risen because the supply of cattle to slaughterhouses is shrinking, Broadbent said. U.S. meatpackers processed 363,000 cattle in the first three days of this week, 7.6 percent less than in the same week last year, USDA data show.

``We've got tight numbers in here,'' Broadbent said. ``It's as tight as it's going to be.''

In another livestock market, hog prices rose the most in four weeks on speculation that U.S. grocers will step up ham purchases to prepare for increased sales before the Christmas and New Year's holidays.

The price of wholesale pork rose the most in a week yesterday after falling to a seven-month low on Nov. 17, USDA data show. Lower-cost meat supplies may have spurred buying from holiday-minded retailers, said Tom Cawthorne, the director of hog trading at R.J. O'Brien & Associates, a brokerage in Chicago.

``We've gotten pretty cheap, and you're getting some processors getting ready for holiday-ham demand,'' Cawthorne said. ``When we see the cutout going higher, that gets futures jacked up.''

Hog Futures Rise

Hog futures for February settlement rose 0.7 cent, or 1.1 percent, to 62.9 cents a pound in Chicago, the biggest gain for a most-active contract since Oct. 21. Futures have increased 8.7 percent this year.

Wholesale pork rose 0.99 cent, or 1.8 percent, to 56.7 cents a pound yesterday, according to the USDA. The price is down 8.8 percent this month. Wholesale ham gained 0.92 cent, or 2.2 percent, to 43.54 cents a pound, the USDA said.

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