Chicago Mercantile Exchange live cattle futures rose Friday on short-covering on expectations that cash prices could move higher in months ahead as supplies tighten, traders and analysts said.
Smaller cattle numbers are approaching, which eventually will put cash closer in line with futures, said Oak Investment Group president Joe Ocrant.
On Friday, feedlots held out for more money after cash cattle on Thursday in Texas and Kansas fetched $123 per hundredweight (cwt). The price was steady compared with to last week and offset lower expectations based on slipping beef values and slim packer margins (all figures US$).
The U.S. Department of Agriculture on Friday morning showed the wholesale choice beef price, or cutout, at $193.06/cwt, 79 cents lower than on Thursday. Select cuts were down 32 cents to $176.92.
Estimated margins for U.S. beef packers on Friday were a positive $1.50 per head, compared with a positive $4.45 on Thursday and a positive $16.85 a week ago, according to HedgersEdge.com.
Some packers have curtailed slaughters to strengthen their margins and boost wholesale beef prices.
USDA estimated that packers this week will process 611,000 head of cattle, 39,000 less than a year ago.
Funds that trade CME live cattle and hogs sold, or rolled, October futures and mainly bought the December contract in accordance with the Standard + Poor’s Goldman Sachs Commodity Index (S+PGSCI). Friday was the last official day for the S+PGSCI process.
Funds also bought October and December live cattle contracts after they cleared key moving average resistance levels.
October closed up 0.425 cent to 125.250 cents/cwt and above the 100-day moving average of 125.16 cents.
December ended 0.525 cent higher at 129.150 cents. It settled above the 40-day moving average of 129.05 cents.
Feeder cattle at the CME drew support from live cattle futures’ gains and lower prices for corn, which could encourage feedlots to buy young cattle.
September ended up 0.275 cent to 157.3 cents while October settled at 159.275 cents, 0.675 cent higher.
Hogs mixed, choppy
CME hogs settled mixed after a volatile trading session.
CME October hogs finished up 0.500 cent to 90.7 cents. The contract’s discount to the exchange’s hog index, which was at 92.98 cents, encouraged buyers.
CME hogs felt pressure from profit taking with the view that cash hog prices are about to top out, given unprofitable packer margins and the seasonal bump in supplies.
December hogs settled at 87.25 cents, down 0.025 cent after spiking to a new contract high of 87.975 cents.
The U.S. government on Friday morning reported the average hog price in the eastern Midwest down 57 cents/cwt from Thursday to $90.53. Cash prices elsewhere in the Midwest were unquoted.
HedgersEdge.com estimated margins for U.S. pork packers on Friday were a negative $2.45 per head, compared to a positive $5.80 on Thursday and a positive $6.05 a week ago.
The prospect that spread of the porcine epidemic diarrhea virus (PEDv), which is fatal to baby pigs, will reduce supplies later this year periodically supported deferred hog months.
Those contracts at times receded amid worries that hog farmers may increase production as corn prices decline.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.