By Benjamin Parkin
Livestock futures ended the week sharply lower as traders reacted to softening cash markets.
Prices for physical cattle and hogs have been steady to lower this week. With supplies for both forecast to grow next year, analysts expect further pressure on cash prices ahead.
Live cattle futures for December fell 1.6%, to $1.20575 a pound, at the Chicago Mercantile Exchange on Friday, down 6% after peaking last week. December lean hog futures fell 1.1%, to 62.475 cents a pound, down 8%.
The U.S. Department of Agriculture projected on Thursday that corn farmers would produce a larger crop than expected this year, spurred by a surprise increase in the national yield to a record 175.4 bushels per acre.
Meat analysts said that would likely bode ill for cattle and hog prices going forward, with the extra availability of cheap feed encouraging farmers to expand their herds.
"For those farmers that grow corn but also raise hogs/cattle, converting into protein remains a profitable alternative," said the Steiner Consulting Group in a note to clients. "We would expect more farmer feeding of cattle and a strong incentive to increase pork production in 2018."
The same USDA report also forecast higher beef and pork production and supply next year. The agency increased its per capita consumption projections for 2018, but trimmed pork exports.
Hog producers say they are increasingly reliant on exports to offload the extra supply, particularly after two new slaughterhouses opened in September and farmers increased their herd sizes in anticipation.
Red meat prices were higher at midday Friday. Wholesale beef rose $1.84, to $214.58 per 100 pounds, with pork up 37 cents, to $81.69.
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