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U.S. live cattle rally with hog, corn futures

Chicago Mercantile Exchange (CME) live cattle rallied on Wednesday with the rise fuelled by higher CME hogs and Chicago Board of Trade corn futures, traders and analysts said.

They said soaring wholesale pork prices may cause grocers to feature more beef for backyard cookouts on the U.S. Independence Day holiday.

They added that cattle and hog producers might feed fewer animals, and to lighter weights, if corn prices continue to rise.

CME live cattle investors adjusted positions before Friday’s U.S. Department of Agriculture’s monthly cattle-on-feed report, which analysts expect will show fewer cattle were placed in feedlots last month as feed costs rose and grazing pastures improved.

Nearby live cattle contracts broke through key moving average resistance levels, triggering fund buying.

June finished up 0.975 cent per pound at 120.475 cents, settling above the 20-day moving average of 120.215 cents (all figures US$).

August closed 1.375 cents higher at 120.4 cents. It finished above the 40-day moving average of 120.374 cents.

CME live cattle climbed despite eroding wholesale beef prices. Packers cut fresh beef values to compete with pork.

Ample cattle supplies could prompt packers to limit cash spending.

USDA’s Wednesday morning data showed the wholesale price of choice beef fell $1.46 per hundredweight (cwt) from Tuesday to $198.78. Select cuts slipped 11 cents to $184.28.

Spotty cash cattle bids stood at $116 per cwt with no asking prices from sellers, feedlot sources said. Cash-basis cattle last week moved at $120.

Higher live cattle futures and prices for cash feeder cattle at the closely-watched Oklahoma City market lifted CME feeder cattle.

August settled 0.85 cents/lb. higher at 144.65 cents and September was at 147 cents, or 0.775 cent higher.

Hogs jump on discount

CME July hogs’ discount to the exchange’s hog index, which was at 103.28 cents, attracted buyers, analysts and traders said.

They said short-covering sparked by the recent run-up in cash hogs and wholesale pork prices provided more support for CME July hogs.

Tighter-than-anticipated seasonal hog numbers forced packers to cut slaughters. Those cutbacks reduced the flow of fresh product to retailers, which pushed pork prices even higher.

“We were very impressed that packers were able to adjust slaughter levels enough to re-ignite the wholesale pork market,” said Allendale chief strategist Rich Nelson.

Fund buying helped drive August CME hogs to a 5 1/2-month top, a trader said.

But uncertainty about the direction of cash hog and wholesale pork prices in the near term landed nearby contracts near session lows.

Wednesday morning’s government mandatory wholesale pork price report, calculated on a plant-delivered basis, was at $105.93/cwt, up 14 cents from Tuesday, according to USDA.

Government data showed the average hog price on Wednesday morning in the most-watched Iowa/Minnesota hog market at $97.66/cwt, $2.10 lower than on Tuesday.

CME July hogs settled 1.275 cents/lb. to 99.975 cents. It marked a contract high of 103.325 cents in after-hours trading.

August settled 1.075 cents higher at 98.375 cents.

— Theopolis Waters reports for Reuters from Chicago.

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