Cattle futures markets Thursday are weaker as investor concerns about domestic meat demand mount, overruling expectations of larger exports made possible by a weaker U.S. dollar.
The April contract recently traded on the Chicago Mercantile Exchange at $1.1680 a pound, down $0.47 or 0.40%. June was off 0.22c, or 0.20%, at $1.1332.
May feeder cattle were at $1.3097, up 0.57c, or 0.44% in electronic trading while August was up 0.42c, or 0.31%, at $1.3527.
Federal Reserve Chairman Ben Bernanke's comments Wednesday indicating the Fed had no plans to alter its loose money policy were supportive to gold but pressuring to the dollar. He said there were no plans to tighten the money supply after the end of its second Quantitative Easing program came to an end in June.
Bernanke indicated inflation was not a major concern of the Federal Reserve at this time, sending investors to move funds into gold or other investments.
The lower dollar should have been supportive to cattle futures because of expectations for increased exports. However, indications of declining domestic beef demand with wholesale prices struggling to hold near recent highs and packers cutting slaughter rates had traders moving funds out of cattle, overruling the influence of a weaker dollar since domestic demand consumes about 87% of U.S. beef production, said Mike Zuzolo, president of Global Commodity Analytics and Consulting.
Yet inflation may be a larger issue than Bernanke was letting on, and investors appear to be worried. Thursday, the Commerce Department released its inflation and consumer purchasing reports showing personal consumption expenditures were up 3.8%, compared with expectations of less than 2%.
"Bernanke said inflation was 'transitory,' but after these figures we might be able to say inflation is 'substantially transitory,'" Zuzolo said.
Meat demand also is beginning to weigh on traders' minds, said David Hutchins, president of Amarillo Brokerage. The U.S. Department of Agriculture reported the composite carcass price for pork Wednesday was down $2.38 a hundred pounds to a six-week low of $92.44. Wholesale beef prices also were lower.
This year's grilling season has gotten off to a slow start with cool, wet weather blanketing many large consuming areas of the country. Grilling demand usually boosts consumption of steaks and chops, the more expensive cuts from the carcasses. Grilling activity usually fades in the summer, and many retail and restaurant dealers already are booking beef orders for the summer months after seeing a slow grilling season, a time when meat demand should have been strongest.