040902 Cattle Prices Rise on Speculation U.S. Beef Demand Will Climb

Bloomberg - Cattle prices in Chicago rose from a 15-week low on speculation that an increase in the number of animals slaughtered signals higher beef demand by U.S. grocers and food-service companies.

Meatpackers processed 5.4% more cattle the first two days of this week than a week earlier as wholesale beef prices rose from a six-month low, government figures showed. Beef prices still have dropped 21% from this year's high in April as consumers shifted to lower-priced pork and chicken.

``The improvement in beef prices is telling some people the slide in beef demand may be over,'' said Dennis Kissler, trading manager for KIS Futures Trading in Oklahoma City. ``Beef packers need some live inventory to meet improving demand for beef.''

Cattle futures for October delivery rose 0.525 cent, or 0.6%, to 82.9 cents a pound on the Chicago Mercantile Exchange, the first increase this month. A futures contract is an agreement to buy or sell a commodity at a specified price and date.

The most-active contract fell 7.9% in the three weeks ended Sept. 3 as grocers offered more pork and chicken specials to consumers looking to stretch incomes strained by record energy prices, Kissler said.

Wholesale beef prices rose 0.5% to $1.3366 a pound, the Department of Agriculture said. Sales at midday rose 33 from total sales yesterday and 27% from midday sales a week earlier, the government said.

Bids by meat processors for cattle, grading 65% to 80% choice beef, rose 1% to 80.92 cents a pound, the department said.

Crude-oil prices have dropped 13% from a record $49.40 a barrel on Aug. 20. They still have gained 48% in the past year.

Many traders expect beef demand to rise further as oil prices fall, which will improve consumer confidence and job security, Kissler said.

``All we need now is for the stock market to continue to move higher and generate further bullish momentum to the ideas that beef prices and demand have bottomed,'' Kissler said.

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