Cattle and Hog Futures Decline, Anticipating Big Meat Supply
Undated (AP) _ Cattle and hog futures went into sharp declines Tuesday on the Chicago Mercantile Exchange as the market began adjusting to a huge meat supply expected later this year.
On other markets, grains, soybeans and energy futures moved lower while precious metals advanced.
Trading was disrupted on New York futures markets during the morning because of computer problems at the Commodities Exchange Center, which provides support services.
Typically, meat prices go into a seasonal decline at this time of the year, and traders said this partly accounts for Tuesday’s retreat.
But additionally, producers have been doing well and expanding their herds to take advantage of high price levels. Friday will give a good indication just how big an expansion there’s been in the cattle population.
Charles Levitt, senior livestock analyst in Chicago with Shearson Lehman Brothers Inc., said he expects the USDA’s seven-state cattle-on-feed report to show a 6 percent increase from a year ago.
Barring 1991, this would be the largest June 1 inventory of cattle on feed in 20 years.
The hogs report June 30 could be even more bearish.
Levitt said his projection is for a 3 percent increase in the hog population, with the breeding herd up 4 percent and the animals heading for market up 2.5 percent.
If true, this would give the nation it’s largest second-half hog production in history.
″So what we’re talking about is a huge production of meat in the third and going into the fourth quarter, and the market is beginning to recognize this,″ said Levitt.
Cattle futures for delivery in June were down 0.95 cent and settled at 76.95 cents a pound; August feeder cattle were 0.80 cent lower at 87.47 cents a pound; June hogs were 0.03 cent higher at 51.25 cents a pound, but all other contracts were lower; and July pork bellies were 0.93 cent lower at 33.32 cents a pound.
Precious metals futures advanced on New York’s Commodity Exchange, with gold gaining more than $4 an ounce.
Traders said there was a buying spurt in gold after the computers came back up at the Commodities Exchange Center. They said speculators who had sold borrowed futures, anticipating they could earn a profit if the price went down, wanted to even their positions in case there were more disruptions.
The June gold contract settled $4.30 higher at $369.60 a troy ounce; June silver was 7 cents higher at $4.282 a troy ounce.
The grain market had a mind of its own at the Chicago Board of Trade.
Wheat lost as much as a nickel a bushel, while corn, soybeans and oats were off by lesser amounts.
″All the fundamentals pointed the other way,″ said William Biedermann, research director at Allendale Inc. in Crystal Lake, Ill. ″But when the market failed to respond, people just came in and liquidated their positions.″
Traders had expected USDA crop reports released Monday to send prices higher.
The wheat crop, suffering from excessive moisture, has deteriorated over the last week, the Agriculture Department said.
And wet weather has left an estimated 16.6 million acres intended for soybeans not planted yet. In addition, 3 million acres intended for corn are unplanted and probably won’t be put in corn any more this season, Biedermann said.
Wheat for delivery in July was 4 3/4 cents lower at $2.81 a bushel; July corn was 1 3/4 cent lower at $2.12 3/4 a bushel; July oats were 3 cents lower at $1.28 1/4 a bushel; and July soybeans were 1 3/4 cents lower at $5.82 a bushel.
Crude oil futures slumped lower at the New York Mercantile Exchange, with the July delivery hitting a life-of-contract low of $18.55.
Traders said the market followed London crude oil prices that skidded because of ample supplies coming out of the North Sea.
The July light sweet crude oil delivery settled at $18.58 a barrel, down 31 cents; July heating oil was down 0.45 cent at 52 cents a gallon; July gasoline was down 0.61 cent at 53.93 cents a gallon; and July natural gas was down 4.8 cents at $2.152 per 1,000 cubic feet.