090316 Cattle Drop as Unemployment Surge May Cut Beef & Hogs

March 7, 2009

(Bloomberg) -- Cattle futures declined for a second straight day on speculation that beef demand will shrink as more U.S. consumers lose their jobs. Hog futures gained.

The unemployment rate jumped to the highest since December 1983 last month, the U.S. Labor Department said today. Wholesale choice beef fell the most in a week today and has slumped 5.7 percent this year, U.S. Department of Agriculture figures show.

Rising unemployment is "certainly not a positive" for livestock prices, said Dick Quiter, an account executive at FuturesOne in Chicago. "People aren't going to stop eating, but they might quit eating at restaurants, and maybe not eat steak quite as often."

Cattle futures for April delivery fell 1.45 cents, or 1.7 percent, to 82.45 cents a pound on the Chicago Mercantile Exchange. The price earlier touched 82.15 cents, a new low for the contract. April futures dropped 4 percent this week, the second weekly decline in the past three.

Feeder-cattle futures for April delivery sank 2.2 cents, or 2.4 percent, to 90.625 cents a pound in Chicago.

Wholesale choice beef fell 0.46 cent, or 0.3 percent, to $1.3501 a pound at midday, the biggest drop since Feb. 26 and down 12 percent from this year's high on Jan. 20, USDA data show. The price slid to $1.3221 on Feb. 27, the lowest since August 2005.

Beef demand may still increase as the weather warms in the U.S., and the grilling season approaches, said Rich Nelson, a broker at Allendale Inc., in McHenry, Illinois.

"This weekend, the weather is going to be pretty good for grilling in most areas," Nelson said. "We will get a seasonal bounce in the next three to five weeks, based on spring buying for cookout season."

Hog Market

In another livestock market, hog futures for April settlement rose 0.075 cent, or 0.1 percent, to 62.5 cents a pound in Chicago. The contract climbed 2.6 percent this week, the second straight weekly gain.

Wholesale pork prices slipped 0.91 cent, or 1.6 percent, to 55.35 cents a pound yesterday, the biggest drop since Feb. 18, USDA data show. Pork is down 6.7 percent from this year's high on Jan. 8, USDA data show.

Cash-market hog prices gained for a fifth straight session yesterday, lending support to futures, said Quiter of FuturesOne. USDA data show the average cash-market price of lean hogs rose 3.3 percent yesterday to 59.66 cents a pound and is up 19 percent this year.

Pork-belly futures for May delivery advanced 0.3 cent, or 0.4 percent, to 83.2 cents a pound in Chicago, after climbing as much as 1.3 percent earlier. The May contract has climbed 12 percent from a lifetime low of 74 cents on Feb. 24. Pork bellies are cured and sliced to make bacon.

"When you look at the belly market, that's been up strong for two weeks," Quiter said. "If the parts are good, sooner or later the whole hog has to be worth something."