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U.S. livestock: Cash prices push CME live cattle higher

Short-covering supports CME lean hogs

(Photo courtesy Canada Beef Inc.)

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures moved higher for a fourth straight session on Thursday, driven by this week’s cash price surge, traders said.

February live cattle closed 0.75 cent/lb. higher at 121.025 cents, and April closed up 0.475 cent, to 119.875 cents (all figures US$).

Both contracts notched 10-month highs for a third day in a row.

On Thursday, slaughter-ready, or cash, cattle in the U.S. Plains traded at $122-$123/cwt, up from $118-$120 a week earlier, said feedlot sources.

Wednesday’s Fed Cattle Exchange (FCE), on average, brought $120.50/cwt, up from last week’s $119 average.

It appears the FCE is helping set the tone for cash prices, giving producers leverage in negotiating with packers, said independent CME livestock futures trader Dan Norcini.

Improved wholesale beef demand prior to Thursday, fewer cattle for sale than last week and insufficient packer inventories provided cash price support, said traders and analysts.

Market bears believe processors may cut slaughter rates soon based on Thursday morning’s soft beef cutout price and deteriorating packer profits.

Thursday morning’s choice wholesale beef price, or cutout, dropped 89 cents/cwt from Wednesday, at $192.33. Select cuts slipped 18 cents to $187.88, the U.S. Department of Agriculture said.

Average beef packer margins for Thursday were a negative $25.75 per head, down from negative $18.55 on Wednesday and negative $17.10 a week ago, as calculated by HedgersEdge.com.

Buy stops and CME live cattle futures gains boosted the exchange’s feeder cattle contracts. January feeders ended up 0.95 cent/lb., to 131.95 cents.

Firmer hog futures

Short-covering and technical buying supported CME lean hogs, traders said.

They said weaker cash prices and futures’ premiums to the exchange’s hog index for Jan. 17 at 66.01 cents minimized market advances.

February hogs ended 0.225 cent per pound higher at 65.425 cents, and April closed up 0.150 cent to 68.975 cents.

Thursday morning’s cash hog price in Iowa/Minnesota averaged $62.75/cwt, $1.18 lower than on Wednesday, USDA said.

Some packer inventories are full for the balance of the week, but others might pay more for hogs that are in short supply in parts of the Midwest, said regional hog merchants.

Monday’s holiday and last weekend’s ice storm delayed delivery of pigs to processors that are gearing up for a big Saturday kill, a Midwest hog merchant said.

— Theopolis Waters reports on livestock markets for Reuters from Chicago.

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