U.S. livestock: CME cattle up on short covering, discount to cash

Chicago | Reuters — Chicago Mercantile Exchange cattle futures surged on Tuesday in a short-covering rebound from multi-month lows in the prior session, supported by the market’s steep discount to cash market prices.

Feeder cattle futures rose by as much as the daily trading limit, triggering expanded limits for both feeders and live cattle for Wednesday’s session.

Fund long liquidation on Monday had pushed prices of both commodities to fresh lows, including life-of-contract lows in nearly all months before Tuesday’s rebound.

“We went too low in the futures market,” said Don Roose, president of U.S. Commodities. “We overdid it to the downside, the cash market started to stabilize and the funds quit liquidating.”

Some fed cattle at U.S. Plains feedlot markets traded at $175/cwt this week, according to the U.S. Department of Agriculture (USDA), down $2 from last week but still a premium to December futures, which settled 2.875 cents higher at 171.65 cents/lb. (all figures US$).

Actively traded February live cattle surged four cents, to 172.825 cents/lb.

January feeder cattle soared by the daily 8.25-cent limit to end at 221.05 cents/lb.

Trading limits for live cattle will be expanded to 10 cents for Wednesday’s session, while feeder cattle will trade with a limit of 12.25 cents/lb., the CME Group said.

CME lean hog futures also rallied on Tuesday, propelled by short covering and spillover support from sharply higher cattle.

A day after setting a contract low, February hogs gained 2.1 cents to settle at 69.025 cents/lb.

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