Chicago Mercantile Exchange (CME) live cattle futures were higher on Tuesday with a major snowstorm slamming into the U.S. Plains cattle feeding states, slashing fed cattle weights and slowing livestock movement, analysts and traders said.
"This is the second big storm in five days so there is no doubt we are taking some serious weight, some serious beef tonnage off the market," said Don Roose, president of U.S. Commodities, in Des Moines, Iowa.
"We've had an oversupply coming on and now I think the number of cattle coming to market will be coming down and weights will be coming down," Roose said.
CME February live cattle were up 0.325 cent per lb at 127.275 cents per lb and April was up 0.875 cent at 129.300 cents per lb.
Feeder cattle turned up in line with the gains in cattle but gains were slowed by an upturn in the Chicago Board of Trade (CBOT) corn market. CME March feeder cattle were up 0.375 cent per lb at 141.175 cents per lb and April up 0.325 cent at 144.025 cents per lb. At 1:12 p.m. CST (1912 GMT), CBOT March corn was up 9 cents per bushel at $7.02-1/2 per bushel.
Gains in cattle futures were restrained on a lack of bullish enthusiasm or momentum even though a government official said the Obama administration may institute a "rolling" furlough to keep meat plants open during automatic budget cuts rather than idle all 8,400 U.S. meat inspectors at the same time.
"It's just another uncertainty in the market and markets never like uncertainty. It's keeping some people away from the market that could be potential bullish buyers," said Dennis Smith, a broker for Archer Financial.
Although the spending cuts are due to take effect on Friday, it could be weeks or months before the meat industry is directly affected. The U.S. Department of Agriculture has not specified a date when furloughs would begin, but says they are unavoidable.
The snowstorm not only was cutting into livestock weights but slowed processing of meat in the U.S. Plains and Midwest.
Packers on Monday processed 87,000 head of cattle, down 22,000 from a week earlier and 33,000 less than a year ago during the same period, based on USDA data.
Heavy snowfall covered nearly all of the U.S. Plains on Tuesday, adding valuable moisture for the drought-stricken wheat and pasture grazing lands while snarling transportation and hampering cattle feeding and calving, an agricultural meteorologist said.
"I think talk of how severe this storm is has brought in some buying along with a little better beef market. Wholesale beef is not sharply higher but it's up nicely," Smith said.
U.S. beef packer margins on Tuesday were a negative 46.25, versus a negative 42.25 on Monday and a negative 69.55 a week ago.
Deliveries on the February contract, which is set to expire on Feb. 28, totaled 21 contracts. CME data showed R.J. O'Brien issued 8, ADM Investor Services issued 13 and Rosenthal Collins Group stopped the deliveries.