Chicago Mercantile Exchange live cattle futures on Friday posted modest losses, weighed by weaker wholesale beef values and steady to lower cash cattle returns, traders and analysts said.
Friday morning’s wholesale choice beef price slipped 39 cents per hundredweight (cwt) from Thursday to $202.02, and select dropped $1.94 to $187.68, based on U.S. Department of Agriculture data.
This week, cash cattle in Texas and Kansas fetched $132/cwt, which was steady with last week, feedlot sources said. They said Nebraska cash cattle moved at $131 to $132, down $1 to $2 from a week ago.
The cattle market is being dragged down by heavier hogs and the competition from comparatively cheap pork, Linn Group analyst John Ginzel said.
Despite fewer animals for sale, packers struggled with deteriorating profit margins and tepid wholesale beef demand.
Beef packer margins were at a negative $39.00 per head, compared with a negative $27.95 on Thursday and negative $19.20 a week earlier, according to HedgersEdge.com.
Traders sold December futures and bought deferred contracts led by uneasiness about potential deliveries next week, analysts said.
Monday is the first notice day for live cattle deliveries against December futures that will expire on Dec. 31.
Investors kept tabs on wintry weather and bitter cold in portions of the U.S. Midwest that threaten transportation of livestock and could limit weight gains in cattle and hogs.
Spot December closed down 0.225 cent/lb. at 131.425 cents. February ended down 0.05 cent at 132.85 cents.
CME feeder cattle settled up slightly, helped by short-covering and firm far-month live cattle futures.
January feeder cattle ended 0.35 cent/lb. higher at 164.475 cents, and March closed at 164.675 cents, up 0.25 cent.
Mixed hog trade
CME hogs ended mixed with spot December futures pressured by lower wholesale pork prices, which prompted bearish spreads that lifted the February contract.
Friday morning, USDA reported the wholesale pork price, or cutout, tumbled $1.85/cwt from Thursday to $87.48. Friday’s cutout slump was due to lower ham costs and the drop in price for pork bellies, which are made into bacon.
The ham season is winding down and there is an ample amount of pork bellies in U.S. storage warehouses, said Ginzel.
Investors also sold the spot December contract and bought back months in anticipation of packers keeping a lid on cash prices in the near term, traders said.
USDA’s Friday morning direct market hog quotes were unavailable. Midwest dealers said hogs traded steady to down $1/cwt due to plentiful supplies, tepid pork demand and the recent trend of record-high hog weights.
“Weights might have finally topped out with this cold weather but these hogs are still heavy,” said independent hog futures trader Dan Norcini.
The prospect that the spread of the porcine epidemic diarrhea virus (PEDv), which is lethal to baby pigs, could hurt pork production in the first half of 2014 supported deferred hog futures.
Spot December hogs ended 0.85 cent/lb. lower at 81.675 cents. February hogs closed 0.325 cent higher at 89 cents.
— Theopolis Waters reports on livestock markets for Reuters from Chicago.