U.S. livestock: Cattle rise on economic optimism, discount to cash prices

Chicago | Reuters — U.S. cattle futures rallied for a second straight day on Wednesday as easing coronavirus restrictions around the country bolstered optimism about the outlook for the economy and beef demand.

U.S. stocks rose, with the S+P 500 closing above 3,000 for the first time since March 5, as further easing of lockdowns lifted investor optimism.

The Chicago Mercantile Exchange (CME) spot live cattle contract climbed above the 100-cent mark, a key technical level not breached since March 31, lifted by its steep discount to cash cattle prices.

“Speculative short covering and technical buying, and futures’ big discount to cash were the supportive factors today,” said Doug Houghton, analyst at Brock Capital Management.

“There is also economic optimism coming out of Memorial Day, with stocks up again, businesses reopening and states lifting their COVID-19 restrictions.”

CME June live cattle ended 1.4 cents higher at 100.8 cents/lb., while actively traded August rose 1.475 cents to 100.725 cents/lb. (all figures US$).

A light to moderate number of cattle has traded at central and southern U.S. Plains feedlot markets this week at $115-$120/cwt, well above the June contract’s closing price, which is equivalent to $100.80/cwt. Cash and futures prices should converge further as the spot contract nears expiration.

Feeder cattle futures followed live cattle higher, with benchmark August futures up 0.725 cent at 134.025 cents/lb.

Lean hog futures were higher much of the day amid economic optimism. But the market ended mixed as tensions between the United States and China, the world’s top hog and pork market, escalated following comments by U.S. Secretary of State Mike Pompeo about Hong Kong’s autonomy.

Most-active July futures ended down 0.275 cent at 59.3 cents/lb. Deferred contracts were up as much as 1.4 cents.

— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago.