In this file:
· US live cattle futures slump on Cargill news
· Cargill idling not complete surprise
LIVESTOCK-US live cattle futures slump on Cargill news
* Cargill to shut Texas beef plant on Feb. 1
* Lower cash, wholesale beef prices weigh
* Live cattle selloff sinks feeder futures
* Hog contracts climb as cash prices surge
By Theopolis Waters - Reuters
Thu Jan 17, 2013 5:56pm EST
CHICAGO, Jan 17 (Reuters) - Chicago Mercantile Exchange live
cattle futures fell hard Thursday on news that Cargill Inc
plans to close its beef packing plant in Plainview,
Texas, on Feb. 1 due to tight supplies, traders and analysts
CME live cattle futures at one point fell by their 3-cent
daily price limit, but recovered some of those losses later in
"The U.S. cattle herd is at its lowest level since 1952.
Increased feed costs resulting from the prolonged drought,
combined with herd liquidations by cattle ranchers, are severely
and adversely contributing to the challenging business
conditions we face as an industry," John Keating, president of
Cargill Beef, said in a statement.
Spot February closed at 126.600 cents per lb, down
1.925 cents, or 1.5 percent. April ended down 1.825
cents, or 1.38 percent, at 130.875 cents.
"It was a case of shoot first and ask questions later," Oak
Investment Group president Joe Ocrant said in response to what
he called futures' overreaction to news of the plant's closing.
There was nothing overly bearish about Cargill's
announcement, said Ocrant. It confirmed what people knew all
along, that cattle numbers are the lowest in 60 years because of
drought, he said.
David Hales, president of Hales Trading Co, characterized
Thursday's selloff as "panic selling" driven by the belief that
the plant closing would create a surplus of cattle, allowing
packers to buy them cheaper.
"That line of reasoning would only be true if packers were
killing at full capacity, and that's not the case," said Hales.
CME live cattle futures' sellers outnumbered buyers after
grocers showed interest in buying beef only at lower prices.
The price for wholesale choice beef Thursday was $192.20 per
cwt, $1.63 per cwt lower than Wednesday, with sales volume of
215 loads. It was the most for a Thursday since 217 loads on
Dec. 27, according to the U.S. Department of Agriculture.
Investors were still reeling from this week's lower cash
cattle values as processors reduced spending to realign their
Cash cattle in the U.S. Plains fetched $124 to $125 per cwt,
compared with $125 to $128 last week, feedlot sources said.
HedgersEdge.com put the average beef packer margin for
Thursday at a negative $36.95 per head, compared with a negative
$46.90 on Wednesday and a negative $66.75 on Jan. 10.
CME feeder cattle moved lower for an eighth consecutive day,
in sympathy with the steep drop in the live cattle market.
January ended 2.675 cents per lb lower, or down 1.82
percent, at 144.400 cents. Most-actively traded March
finished at 145.850 cents, down 2.375 cents, or 1.6 percent.
HOGS RALLY WITH CASH ...
Cargill idling not complete surprise
By John Perkins - Brownfield
January 17, 2013
According to one livestock market analyst, Cargill’s idling of a major beef packing plant in Texas is a reflection of the current economics of the industry.
Derrell Peel, Livestock Marketing Specialist at Oklahoma State University, tells Brownfield the idling wasn’t a complete surprise, “We’ve said for several months that given the cattle supply situation that we were in, we would not be surprised to see, perhaps, one major beef packing plant, and also some feedlots, close. We’ve had chronic excess capacity in cattle feeding and in meat packing for many years. There’s been some economic pressure which has ramped up significantly in the last year or so and will be fairly strong for the next year to two years…It’s consistent with the market making very long term adjustments.”
USDA’s next set of cattle on feed numbers is out January 25.