Hot beef

July 24, 2006 06:53 AM

Live cattle futures rode a pork shortage and pleasant grilling season to highs near 90¢ per pound in late June, but drifted lower in July.

The end of summer and fewer feeders heading to lots, however, should help prices rebound, according to Rich Nelson, director of research for Allendale Inc.

“Even though production is 6% to 10% over this time last year, October futures are trading around $6 to $7 [per hundred weight] higher,” he says, adding that forth quarter production should be just 1% more than the same period in 2005.

He sees good buying in the October contract around 85.50¢ per pound and

projects a move up to 91.50¢ by late September or early October.

RJO Futures senior broker Joe Nikruto agrees, but believes support is further down. “I’d look at big, round numbers, say 82¢ or even 75.50¢, although I’m not sure we’ll get down there and there is stiff resistance around 91.17¢ to 91.20¢.”

Speculation on mad cow in Canada has failed to affect U.S. prices, and Nelson believes Japan and South Korea will soon lift bans on U.S. beef despite South Korea’s concerns about the ability of American slaughter houses to sequester Canadian cattle, and imports won’t shift back to the United States for at least two years.

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