CME live cattle futures fall on consumer demand questions

By Heather Schlitz

CHICAGO, Aug 28 (Reuters) - Chicago Mercantile Exchange (CME) live cattle futures fell on Wednesday as boxed beef cutout values turned lower ahead of the U.S. Labor Day holiday on September 2, when many Americans light up their grills, traders said.

Feeder cattle futures ended the day mixed.

A heat wave across a large swath of the U.S. offered some support to cattle futures, as the animals typically eat less and gain weight slower when the weather turn hot, traders said.

Still, it was weakness in wholesale beef prices that weighed heavily on the cattle market, eroding gains from the previous day's rally.

Choice boxed beef prices declined by $2.02 to $309.95 per hundredweight (cwt) and select cuts declined by 56 cents to $299.69 per cwt, U.S. Department of Agriculture data showed on Wednesday morning.

Most-active CME October live cattle closed down 0.775-cent at 178.625 cents per pound. Most-active CME October feeder cattle finished up 0.200-cent at 238.575 cents per pound.

Meanwhile, lean hog futures closed higher after a choppy session, as wholesale prices turned higher and inflation-stressed consumers may be shifting over to cheaper pork options, said Dennis Smith, a broker at Archer Financial Services.

Pork carcass values increased by 44-cents per cwt on Wednesday, and values for most other pork cutouts also firmed, according to USDA data.

"Retail beef prices are at a record high. Consumers are hurting with inflation, and the concern is that consumers are beginning to trade down," Dennis Smith, broker at Archer Financial Services, said.

Tuesday's U.S. consumer confidence report, released by the nonprofit Conference Board, showed that consumer confidence rose to a six-month high. But some traders remain doubtful about the public's desire to continue to pay a premium for beef going into the fall.

Smith said consumer demand for sausage and sausage materials appears to be increasing, a sign that people are buying hot dogs and bratwursts instead of pricier meats like steaks.

The consumer confidence report also indicated that consumers are cutting back on their restaurant spending, which can translate to less demand for higher-priced cuts of beef.

CME October lean hog futures ended up 0.4 cents to 81.675 cents per pound. (Reporting by Heather Schlitz; Editing by Mohammed Safi Shamsi)