CHICAGO (Dow Jones)--U.S. live cattle futures fell Friday as traders were cautious about softening demand for meat and also took positions ahead of the week's cash trade.
Cattle for October delivery fell 0.45 cent, or 0.4%, to $1.1995 a pound in trading at the Chicago Mercantile Exchange. October feeder cattle futures rose 0.4 cent, or 0.3%, to $1.3980 a pound.
Traders took cautious positions ahead of the week's cash trade, which is expected Friday after meat packers and producers have remained far apart on prices all week.
Some investors are skeptical that cattle in the cash markets will trade hands at three to four cents a pound higher than last week, as futures suggest, said Rich Nelson, director of research at brokerage Allendale Inc. Cattle mostly traded hands last week at $1.16 a pound. After a rise in cattle futures this week, producers are mostly asking $1.20 a pound.
Although the price of futures often drives cash prices, Friday's session could mark a reversal of those dynamics -- that is, traders are concerned that meat packers will eventually show less buying demand due to a mix of softening demand and very weak to negative profit margins.
A Thursday report from the U.S. Department of Agriculture showed a week-over-week decline in export sales just as wholesale prices have also mostly moved sideways. Despite those signs of weaker demand, cattle futures have mostly risen this week after a cattle-on-feed report from Friday showed smaller-than-expected coming supplies.
The U.S. Department of Agriculture reported choice beef prices Thursday was up 26 cents a hundred pounds at $183.26. Select was up 46 cents at $169.27. Beef sales on the day were reported at 244 total loads.
The latest HedgersEdge packer margin index per cattle is minus $9.10 per head, compared with minus $11.60 the previous day. The index for the week was minus $11.55. This is an estimate of packer returns on cattle slaughtered and processed expressed in the form of an index.
Beef packers were bidding $1.16 a pound on a live basis on Friday morning mostly in the South. In Nebraska, owners were asking mostly $1.90 or more a pound on a dressed basis; packers were recently bidding $1.85.
Prices last week in Texas, Oklahoma and Kansas were at mostly $1.16 a pound on a live basis. In Nebraska, sales prices ranged from $1.82 to $1.84 per pound dressed and $1.15 to $1.16 live.
Smaller showlists, or number of cattle offered for sale, are seen supportive for cash prices this week along with strength in futures prices compared with last week's closing levels. Some brokers say meat packers are in need of supplies for next week, despite negative margins.