US cattle set contract highs on cash, fund buying

By Jerry Bieszk

CHICAGO, May 9 (Reuters) - Cattle futures set contract highs in most months for a second day on Friday amid fund buying sparked by higher prices in the cash market, which reversed early losses from profit taking.

Expectations had been for both cash cattle and wholesale beef to be under pressure this week. Instead cash cattle gained $2 per cwt on Friday and the wholesale choice beef price reached its highest level in nearly a year.

"Seasonal weakness in the cattle market means nothing with the bullish incentives the market is sending producers," said Dan Vaught, livestock analyst with Wachovia Securities.

June live cattle 2LCM8 closed up 0.875 cent at 94.525 cents per lb and August 2LCQ8 was up 0.900 at 100.200. All but June set contract highs and June set a 10-week high.

Vaught noted that consumers have cut back on other items during the recession and eat in more which tends to lead to more purchases of steaks.

"The old theory is that red meat demand holds up under recessionary times. People will tend to avoid major durable purchases and tend to eat better by rewarding themselves for their frugality," said Vaught.

"Another idea is instead of going to restaurants and spending big bucks on a single steak, they will go to the grocery store instead and maybe spend the same amount of money and actually buy more product," he said.

USDA early on Friday put choice beef up 90 cents at $156.90 per cwt, the highest since May 25, 2007. Select was off 63 cents at $151.47.  Continued...