Jan. 24 (Bloomberg) -- Cattle futures surged to a record for the sixth time this month on mounting signs that demand for U.S. beef will exceed production, further eroding inventories. Hog prices slipped.
U.S. feedlots bought 5.9 percent fewer cattle in December than a year earlier, the biggest drop since May, after a drought reduced available supply in Texas, the top producing state, the government said Jan. 20. The drop means fewer animals will be available for slaughter in coming months, said Paul Beere, a market adviser at Prime Agricultural Consultants Inc.
Buying cattle now is “like putting money in the bank,” Beere said in a telephone interview from Brookfield, Wisconsin. “The justification for being able to pay these higher prices now is thinking, ‘If we can’t move it, we’ll put it in cold storage, and it’ll be there in six weeks, and the kill numbers are going to be way down by then.’”
Cattle futures for April delivery rose 0.5 percent to $1.28825 a pound at 10:33 a.m. on the Chicago Mercantile Exchange, after reaching $1.2945, the highest for a most-active contract since the commodity began trading on the CME in 1964. Prices are up 6.1 percent in January, heading for the biggest gains to start a year since 2002.
Yesterday, wholesale beef climbed 0.8 percent to $1.8352 a pound, the biggest gain in six weeks, U.S. Department of Agriculture data show. The meat has climbed 5.8 percent in the past 12 months. Last week, spot prices averaged $1.2564 a pound, up 19 percent from a year earlier, USDA data show.
Feeder-cattle futures for March settlement rose 0.4 percent to $1.544 a pound on the CME. On Jan. 20, the price reached a record $1.55275.
Feedlots buy year-old animals that weigh 500 pounds (227 kilograms) to 800 pounds, called feeders. The cattle are fattened on corn for about four to five months until they weigh about 1,200 pounds, when they are sold to meatpackers.
Hog futures for April settlement slid 0.4 percent to 88.125 cents a pound in Chicago. Before today, prices gained 2.2 percent in the past year.
--Editors: Millie Munshi, Steve Stroth
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