U.S. slaughter cattle prices this week may repeat last week's slump as grocers balk at high-priced beef from packers who are operating their plants at a loss, traders and analysts said.
Furthermore, less-threatening weather could temporarily keep cattle weights near record highs, providing more beef to the retailsector, they said.
"Packers were unable to push up the price of beef to get their margins back in line. So, for now they're taking cattle prices down," said Don Roose, analyst with U.S. Commodities Inc in West Des Moines, Iowa.
Last Friday, slaughter cattle in Kansas and Nebraska fetched $166 to $168 per hundredweight (cwt), down as much as $6 from the week before and off their record high of $174 last month.
Beef packer margins for Monday were a negative $106.50 per head, compared with a negative $132 on Friday and a negative $106.15 a week earlier, according to Colorado-based analytics firm Hedgersedge.com.
Monday morning's choice wholesale beef price was at $252.38 per cwt, down $6.17 from last week. Select was priced at $236.07, off $10.46 from a week ago, said the U.S. Department of Agriculture.
Roose said it is disappointing that beef, and also pork, processors were unable to boost wholesale prices given the fact that cheaper energy and gasoline have allowed consumers to have more disposable income.
On Monday, Chicago Mercantile Exchange live cattle futures suffered their worst one-day drop, almost 2 percent, in three months as funds purged long positions that accelerated the day's partly fundamentally based losses.
"You've had huge fund liquidation because of technical signals. And, the bearish fundamentals are keeping people like me from buying the market," said Joe Ocrant, president of Chicago-based Oak Investment Group.
CME live cattle contracts will continue to grind lower until bullish fundamental news develops, he said.
Investors looking for a buying opportunity cling to U.S. Agriculture Department projections for tight cattle numbers in the fourth quarter into early 2015.
And, historical data shows that CME live cattle contracts tend to bottom out around the middle of December when consistently colder winter temperatures slowdown animal weight gains.