Livestock investors gave vent to their contrary urge,
selling live cattle futures despite the worst August for placements on feedlots
for seven years, but buying lean hogs even though pork levels in storage soared
more than 30%.
Many investors expected live cattle futures to post gains on
Monday after the US Department of Agriculture said that feedlots took on 2.00m
head of cattle last month, a slump of 10.9% year on year, and a decline well
above the 6.0% that investors had expected.
The data, signalling weaker supplies of fattened cattle
emerging for slaughter in late winter and early spring next year, would likely
be viewed as "moderately bullish", Paragon Economics and Steiner Consulting
However, live cattle prices posted small losses in Chicago on
Monday, including for the early 2013 contracts, as a range of pressures weighed
on the market.
Data declining in
Reasons cited by traders included broader economic fears,
particularly over China and Europe, which have fuelled funds to sell down net
long positions in many agricultural commodities in recent weeks.
At FCStone, Ryan Turner flagged the negative impact of other
data in the report, showing that feedlots marketed 4.5% fewer cattle in August
than a year before, leaving their overall inventory close to market forecasts.
Cattle on feed data, change on year and (change forecast by market)
Placed on feed during August: 2.002m head, -10.9%, (-6.0%)
Marketed during August: 1.960m head, -4.5%, (-1.5%)
On feed, September 1: 10.637m head, -0.6%, (-0.1%)
Sources: USDA, Thomson Reuters
Furthermore, the data "confirmed what we already knew" in
showing relatively loose supplies of cattle "right now, but tightening as we go
forward into 2013" as the drop in placements feeds through.
And there is a question over the relevance of the report
itself, which used regularly to produce limit up or down moves, given that it
does not account for the increasingly important dynamics of smaller livestock
farms springing up in states such as Nebraska.
"In the last couple of years, the Cattle on Feed report has
become a bit of a non-event," Mr Turner told Agrimoney.com.
At US Commodities, Don Roose flagged a potential headwind to
higher prices from the upward pressure on beef values that they implied.
"The important question for 2013 is will the consumer pay up
for beef when pork and poultry meat and a lot more reasonably priced," he said.
Meat stocks in cold storage, end of August, change on month (and year)
Pork: 580.783m pounds, +6% (+31%)
Beef: 429.785m pounds, -7%, (no change)
Lamb and mutton: 23.889m pounds, -2%, (+13%)
Total red meat (includes others): 1.039bn pounds, no change, (+16%)
Chicken: 655.272m pounds, +1%, (-6%)
Total poultry (includes others): 1.213bn pounds, +1%, (-1%)
Indeed, separate USDA data showed that stocks of pork held
in US cold storage as of the end of last month was, at 580.8m pounds, 31% higher
than a year before, after farmers attempting to escape elevated grain prices
ramped up slaughter rates.
"The sharp increase in hog slaughter and seasonally slower
demand for pork loins at the end of August likely combined to push more product
into freezers," Paragon Economics and Steiner Consulting said.
The data "will likely be viewed as bearish for pork prices
in the near term".
However, futures in lean hogs at least rose, standing 0.6%
higher at 75.45 cents a pound in late deals for Chicago's best-traded December
contract, the lot's highest since early August.
"There is a feeling that, while stocks are large, we will be
able to move pork because beef supplies are so tight," Mr Roose said.