Cash optimism buoys U.S. cattle, hogs futures

USDA cold storage report on tap for Wednesday

U.S. live cattle futures gained as improved wholesale beef values fueled expectations for steady-to-higher cash prices this week, said analysts and traders.

Investors are anticipating a better cash market and beef prices may trend higher as demand returns to normal in the North East after Hurricane Sandy, said Vetterkind Cattle Brokerage president Troy Vetterkind.

The wholesale price for choice beef on Tuesday morning was $194.62 per hundredweight (cwt), up 45 cents from Monday, and select cuts jumped 93 cents to $173.90, according to the U.S. Department of Agriculture (all figures US$).

Chicago Mercantile Exchange live cattle closed 0.45 cent per pound higher at 127.05 cents. February ended at 130.525 cents, 0.375 cent higher.

Bids for cash cattle in the southern Plains were $122-$123/cwt while sellers priced their animals at $127-$129, said feedlot sources. Cash cattle last week moved at $125-$126.

Feedlots will resist selling cattle below last week’s prices as long as futures co-operate, a Kansas feedlot manager said.

Packers will buy animals for next week, the first full workweek after the U.S. Thanksgiving Day holiday on Nov. 22. Also, fewer cattle are available for sale than a week ago.

Still, processors will attempt to spend less for supplies while trying to recoup lost margins.

HedgersEdge.com put the average beef packer margin for Tuesday at negative $49.10 per head, compared with negative $68.20 on Monday and negative $68.50 on Nov. 13.

The government will issue its monthly cold storage report, which will include total beef and pork inventories, at 2 p.m. CST on Wednesday.

Analysts on average expect the government’s cold storage data to show total October beef stocks at about 420.3 million lbs., compared with 425.6 million in September and 417 million during October 2011.

CME feeder cattle drew support from live cattle market gains.

January closed up 0.05 cent/lb. to 146.050 cents. March ended at 148.475 cents, up 0.075 cent.

Hogs firm

Hog futures rose amid sentiment that cash hog prices may be close to bottoming out even though cash values trended lower Tuesday morning.

The average hog price in the eastern Midwest region was $71.16, down 69 cents.

CME hogs also gained despite December future’s premium to CME’s cash price index at 79.13 cents.

December hogs settled at 81.65 cents/lb., gaining up 0.2 cent.

February closed at 87.7 cents, up 0.275 cents. It earlier hit a new contract high of 87.975 cents in after-hours trading.

"It’s a numbers game with some traders looking for hog supplies to tighten based on slaughters that are fairly close to year-ago levels," a trader said.

The combined slaughter for Monday and Tuesday was 869,000 head, 36,000 more than a week earlier and up 1,000 from a year ago for the same period.

While some packers have enough hogs for the rest of the week, others look to book supplies for next week’s post-holiday slaughter.

Analysts’ average forecast for pork inventories last month was 632.5 million lbs., compared with 630.7 million in September and 488.7 million a year earlier.

– Theopolis Waters writes for Reuters from Chicago.

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