Chicago Mercantile Exchange (CME) live cattle futures closed lower on Friday, with weaker beef markets and expectations for lower cash cattle trade in the U.S. Plains feedlot region lending pressure, traders and analysts said.
Cattle futures have been up and down all week in consolidating trading as the market sought fresh leads from the price of cattle on the hoof and prices for choice beef as it nears the retail chains.
“Cattle are kind of in a holding pattern. Discounts have already been built into futures anticipating lower cash, but cash markets aren’t eroding as fast as expected,” said Don Roose, president of U.S. Commodities in Des Moines.
The U.S. Department of Agriculture’s boxed beef report on Friday showed wholesale choice beef at $201.94 per hundredweight (cwt), down $1.69 (all figures US$).
“Cash cattle haven’t traded yet, but the feeling is they could be a dollar lower and the boxed beef market is coming down,” Roose said.
CME cattle for June delivery were down 0.325 cent per pound at 120.125 cents, and for August delivery they were down 0.8 cent/lb. at 119.225 cents.
Estimated packer margins for U.S. beef on Friday were a positive $36.95 per head, down from $39.70 on Thursday and down from $69.85 a week ago, according to Denver-based livestock marketing advisory service HedgersEdge.com LLC.
Feeder cattle futures also closed lower on Friday on spillover pressure from sliding cattle markets, with losses extended due to higher Chicago Board of Trade corn futures.
“Livestock are still finding a lot of direction from the grain markets,” Roose said.
The higher corn price led to concerns about increased costs to feed cattle, which could cut back on the demand for young feeder cattle to place on feed.
CME August feeder cattle ended down 1.025 cents/lb. at 143.625 cents, and September feeder cattle were down 1.1 cents/lb. at 145.8 cents.
Lean hog futures ended higher with spot June soaring to a four-month high as cash hogs remained on firm footing and demand for live animals remained robust.
“Packers are still scrambling for hogs and that’s giving support to futures,” Roose said.
Cash hogs in the U.S. Midwest on Friday were steady to $1/cwt higher, and supplies remained short, with dealers saying they expected further tightening next week.
Some of the decline in hog numbers was being linked to porcine epidemic diarrhea virus (PEDV), a virus that has now been detected at 103 sites in 11 states.
Hog owners hit by PEDV had a decline in pig and hog input, which forced them to slow production. “It is too early to tell how much herd devastation this virus will cause,” an Illinois dealer said.
Estimated margins for U.S. pork packing companies on Friday were a negative $6.90 per head, compared with a negative $5.35 on Thursday and a negative $2.65 a week ago, according to HedgersEdge.com.
CME lean hogs for June delivery were up 0.825 cent/lb. at 98.125 cents,and July-delivery hogs were up 0.375 cent, at 96.2 cents/lb.
— Sam Nelson covers ag commodity markets for Reuters in Chicago. Additional reporting for Reuters by Alyce Hinton in Chicago and Theopolis Waters in Des Moines.