U.S. cattle and hog futures closed sharply higher Friday and for the week with the April cattle the highest ever for a lead contract on widespread fund buying and short covering.
Both markets have fully recovered the losses incurred shortly after Japan’s March 11 earthquake. In the days after that disaster, cattle futures lost about six per cent of their value and hog futures more than five per cent.
Fund buying pushed the markets to the day’s highs, but it was cash market events that started futures higher.
In cattle, higher cash sales this week in Nebraska, the No. 2 cattle state behind Texas, at $190 per hundredweight (cwt) on a carcass basis triggered buying in futures (all figures US$). As the futures rose short covering and chart-based buy orders were activated.
“If you were short, would you be happy right now?” said one cattle trader explaining the rush by some traders to buy back short positions.
Since the Japanese earthquake, wholesale beef prices rose to their highest since 2003, cash cattle traded higher from Texas to Nebraska, and Japan was back in the market buying U.S. beef.
Also, Japan may need to buy more beef to replace meat that was either spoiled due to power outages or contaminated by the radiation leaks, said Dan Norcini, an independent livestock trader.
The U.S. Department of Agriculture on Thursday reported Japan bought 3,900 tonnes on U.S. beef last week, the largest sale to any country that week.
While beef demand is strong, the supply may decline, which could force cattle prices even higher, traders said. The U.S. cattle herd is the smallest in more than 50 years and feedlot cattle numbers are expected to decrease in the months ahead.
April cattle futures closed up 2.775 cents, or 2.4 per cent, at 118.600 cents per pound and actively traded June was up 2.975 cents, or 2.59 per cent, at 117.750 cents.
April peaked Friday at 118.650 cents per pound, the highest ever for a lead contract.
Feeder cattle moved higher with live cattle with March up 1.100 cents, or 0.84 per cent, at 131.900 cents per pound and April up 2.225 cents, up 1.68 per cent, at 134.850.
Hog futures advanced, with June contract the highest in a month, helped by this week’s higher pork prices and by talk of pork plants needing hogs to maintain production schedules.
Also, a USDA report on Friday showing a $7.37/cwt increase in the average Iowa/Minnesota cash hog price helped push futures higher. Cash and futures traders speculated that jump in cash may reflect a price increase over a few days.
USDA’s Hogs and Pigs Report, released after the close, appeared to have little effect on Friday’s futures trading. The report showed about one per cent more hogs on U.S. farms as of March 1 than a year ago and a breeding herd about unchanged from a year ago.
April hogs closed up 2.150 cents, or 2.27 per cent, at 92.475 cents per pound and June up 2.525 cents, or 2.5 per cent, at 103.700.