Cattle Drop 3-cent Price Limit After Bearish USDA Report
Chicago Mercantile Exchange cattle futures tumbled about 2 percent on Monday after government data on Friday showed bigger-than-expected placements of cattle on feed in August.
Most-active CME December live cattle dropped by the daily price limit of 3.000 cents to finish at 114.425 cents per pound, reversing from Friday's 1-1/2 month high. Front-month October cattle settled 2.350 cents lower at 109.225 cents.
The U.S. Department of Agriculture following the close of futures trading on Friday said the number of cattle that moved into feed lots spiked 3 percent last month. Analysts had predicted a decline in placements of nearly 3 percent.
Bigger placements suggested more cattle would reach slaughter weight by late this year and early next year. The USDA also showed ample supplies of U.S. beef in cold storage, further pressuring cattle futures.
"It was a knee-jerk reaction," CHS Hedging Steve Wagner said of the selling in cattle.
December cattle quickly fell by the daily price limit when trade resumed on Monday and remained locked limit-down until the close. CME October feeder cattle fell by their price limit of 4.500 cents to finish at 151.600 cents per pound.
Trading limits in live cattle will be expanded to 4.500 cents on Tuesday and feeder cattle limits to 6.750 cents, the CME Group said on its website.
Wagner said cattle futures could rebound based on strong demand from beef packers. Packers last week in the southern U.S. Plains paid about $108 per cwt for cattle, up from $105 to $106 in the previous week.
CME lean hog futures were higher, recovering from recent losses on technical buying and unwinding of cattle-hog spreads.
Front-month CME October lean hogs fell to a contract low of 55.375 cents per pound, before finishing up 0.625 cent at 56.325 cents. Most-active CME December hogs gained 0.800 cent to 57.425 cents.
"It's a reversal ... the (hog) market has been oversold long enough where we can have a nice bounce," Wagner said.
