Chicago Mercantile Exchange (CME) live cattle futures closed higher on Friday aided by Thursday’s stronger-than-expected cash prices, signalling tighter cattle supplies ahead, traders and analysts said.
Cattle in the Nebraska cash market on Thursday fetched $123 to $124 per hundredweight (cwt), $1 to $2 higher than on Wednesday but steady to down $2 from last week, feedlot sources said (all figures US$).
CME spot February live cattle closed at 126.3 cents per pound, 0.425 cents higher. April ended up 0.4 cent at 130.75 cents.
CME live cattle rose more than one per cent for the week despite Wednesday’s drop in cash prices as packers grapple with unprofitable margins and slumping wholesale beef values.
The market also weathered negative news on Wednesday that Russia may block the imports of some U.S. beef on Feb. 4 due to concerns over the feed additive ractopamine.
"I was really impressed how well the market ended despite all the bad news thrown at it. The psychology is shifting with people thinking cash may have bottomed out," a trader said.
Still, CME live cattle eased from highs of the day as some investors exercised caution before the U.S. Department of Agriculture’s monthly cattle-on-feed report to be issued at 2 p.m. CST.
Analysts expect the data to show the number of cattle placed in feedyards in December rose for the first time in seven months as drought shrivelled winter-wheat grazing pastures.
CME feeder cattle closed mixed amid pre-report positioning. Futures ended nearly one per cent higher for the week.
Spot January ended up 0.1 cent/lb. at 144.7 cents. Most-actively traded March finished unchanged at 147.95 cents and April closed down 0.025 cent to 151.15 cents.
Hog futures fell in anticipation for lower cash hog prices next week, prompting profit taking after three consecutive days of gains, traders and analysts said.
The average hog price in the most-watched Iowa/Minnesota market Friday morning was $86.49/cwt, down $1.17 from Thursday, USDA said.
Packers may also cut bids for cash hogs to bring their margins back in line, a trader said.
The average pork packer margin for Friday was a negative $8.65 per head, compared with a negative $6.65 on Thursday and a negative $8.40 on Jan. 18.
Current hog supplies are generally tight based on declining hog weeks. But, a break in wintry weather in the Plains next week could allow more hogs to flow to market.
Spot February hogs settled down 0.225 cents/lb. to 86.825 cents. Most-active April ended at 88.925 cents, 0.75 cents lower.
Futures finished higher for a second week in a row after gaining almost 1.7 per cent this week.
— Theopolis Waters writes for Reuters from Chicago.