U.S. livestock: CME live cattle rally on discount to cash prices

Chicago | Reuters — Chicago Mercantile Exchange live cattle closed higher on Monday and erased Friday’s losses, supported by short-covering and futures’ discounts to last week’s cash prices, traders said.

June closed 0.825 cent per pound higher at 153.15 cents, and August rose 0.875 cent to 152.15 cents (all figures US$).

“They (traders) can’t fight the discount,” said Oak Investment Group president Joe Ocrant.

Last week, market-ready (cash) cattle in the U.S. Plains traded at mostly $160 per hundredweight (cwt) versus $159 to $161 the prior week, feedlot sources said.

Investors are waiting to see how packers respond cash-wise to possibly more cattle for sale this week and last week’s sharply lower wholesale beef prices, which eroded their margins.

Monday’s beef packer margins were a negative $17.25 per head, compared with a positive $13.85 on Friday, according to HedgersEdge.com.

Monday morning’s choice wholesale beef price had slipped 55 cents/cwt from Friday to $254.44. Select cuts gained 99 cents to $244.82, the U.S. Department of Agriculture said.

Beef demand usually slows down in June, but forecasts for drier weather in parts of the U.S. Midwest might generate retail buying for grilling, traders and analysts said.

In a trading strategy known as bear spreads, investors bought the August contract and simultaneously sold June ahead of its expiration on June 30.

CME feeder cattle drew support from short-covering, live cattle futures buying and steady-to-firm cash feeder cattle prices.

August ended 0.6 cent/lb. higher at 223.55 cents.

Short-covering lifts hog futures

CME lean hogs ended higher on short-covering and moderately bullish market fundamentals, traders said.

June closed up 0.825 cent/lb. to 84.65 cents, and July gained 0.9 cent to 84.35 cents.

Cash hogs in the Midwest sold mostly steady to up 50 cents/cwt on Monday morning, with packers needing supplies for this week’s production, regional dealers said.

USDA reported the morning’s wholesale pork price at $87.33/cwt, up 53 cents from Friday.

Spring barbecues and supermarkets featuring pork after National Beef Month in May helped drive up wholesale pork prices, traders and analysts said.

In bear spreading activity, traders bought deferred trading months and sold June as it prepares to expire on June 12. The spreads lifted June beyond the 20-day moving average of 83.69 cents, which touched off fund buying.

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