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U.S. livestock: CME live cattle rally before USDA report

Feeder cattle market end higher, hog contracts close sharply lower

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(Photo courtesy Canada Beef Inc.)

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures on Friday gained for the first time in seven sessions, partly buoyed by short-covering and positioning before the U.S. Department of Agriculture’s monthly Cattle on Feed report at 2 p.m. CT.

Analysts on average expect Friday’s report to show 7.2 per cent fewer cattle placed in feedlots last month than a year ago.

June closed up 1.475 cents/lb. to 151.9 cents, and August 1.325 cents higher at 150.675 cents (all figures US$).

Futures made headway despite sharply lower prices for market-ready (cash) cattle.

A small number of cash cattle in the U.S. Plains moved at $150/cwt, down from $152 to $155 a week ago, said feedlot and industry sources.

Futures responded as if traders had anticipated cash weakness, said Cassandra Fish, author of industry blog The Beef.

“What remains to be seen is what kind of volume trades by the end of the day. Packers are playing it rather coy, with limited bids noted,” she said.

Processors recently cut kills to grow margins, boost wholesale beef costs and control cash spending.

Beef packer margins for Friday were at a positive $25 per head, compared with a positive $19.70 on Thursday, as calculated by HedgersEdge.com.

Friday morning’s wholesale choice beef price was up a penny from Thursday to $250.84/cwt. Select cuts rose $1.06, to $245.79, based on USDA data.

Fund buying and buy stops contributed to deferred-month live cattle market advances, traders and analysts said.

CME feeder cattle drew support from short-covering, soft corn prices and live cattle futures’ turnaround.

August ended up 1.5 cents/lb. to 223.425 cents.

Hogs down on fundamentals

Lower-trending cash hog and wholesale pork prices significantly undercut CME lean hogs, traders said.

July closed down 2.275 cents/lb. to 75.75 cents, and August 2.175 cents lower at 73.825 cents.

USDA quoted Friday morning’s average cash hog price in the western Midwest at $75.83/cwt, down 55 cents from Thursday and $1.68 lower than a week ago.

Government data showed the morning’s wholesale pork (cutout) price at $82.18/cwt, $1.76 lower than on Thursday and down $2.84 from last week.

Packers bought more hogs at lower cost, which suggests hogs are plentiful, said AgFutures Managed Investments trader Tom Cawthorne.

“And the cutout being down definitely does not feed the bulls,” he said.

Theopolis Waters reports on livestock markets for Reuters from Chicago.

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