Cattle Fall to 2-Year Low as U.S. Beef Demand Wanes; Hogs Drop

By Whitney McFerron

Dec. 4 (Bloomberg) -- Cattle futures fell to a two-year low on signs that U.S. meatpackers are buying fewer animals as beef demand wanes. Hogs also declined.

Wholesale beef prices are the lowest in a month, and slaughterhouses processed 113,000 cattle yesterday, down 11 percent from the same day last week, government data show. The slowdown may increase beef supplies because cattle are spending more time on feedlots eating corn, said Dennis Smith, a senior account executive at Archer Financial Services Inc.

“It sounds like packers are cutting back on slaughter, which is not good,” Smith said in a telephone interview from Chicago. “It tends to make the average animal heavier coming to market. And it indicates an eroding demand base for the animals, so packers are very unlikely to pay high money.”

Cattle futures for February delivery declined 0.4 cent, or 0.5 percent, to 83.675 cents a pound at 9:53 a.m. on the Chicago Mercantile Exchange. Earlier, the price touched 83.55 cents, the lowest for a most-active contract since Aug. 3, 2006. Before today, the price was down 13 percent this year and 23 percent since reaching a record $1.09575 on July 11.

Feeder-cattle futures for January delivery fell 0.025 cent to 88.325 cents a pound in Chicago. The most-active contract was down almost 18 percent this year, as of yesterday.

Wholesale choice beef dropped 2.66 cents, or 1.8 percent, to $1.4875 a pound yesterday, the lowest price since Nov. 5, according to the U.S. Department of Agriculture. That marked the eighth decline in nine sessions.

U.S. meatpackers processed 31.2 million cattle this year through Nov. 29, a gain of 0.1 percent from the same time last year, according to USDA estimates.

Hog futures for February settlement dropped 0.375 cent, or 0.6 percent, to 64 cents a pound in Chicago. Earlier, the price touched 63.85 cents, the lowest for a most-active contract since Nov. 25. The price was up 11 percent this year through yesterday.

Wholesale pork gained 1.32 cents, or 2.2 percent, to 60.96 cents a pound yesterday, the USDA said. The price is up 5.1 percent this year.

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