Chicago Mercantile Exchange live cattle closed higher on Friday, helped by short-covering and positioning before the U.S. Department of Agriculture’s monthly cattle-on-feed report at 2 p.m. CT, traders said.
Most analysts polled by Reuters expect the USDA data to show placements gained slightly in November as cheaper corn encouraged feedlots to bring in more young cattle to fatten.
Traders also bought futures in anticipation of packers spending more for cattle after the year-end holidays due to tight cattle supplies through 2014.
“If you look at next year, of all the commodities, cattle are one of the few in which supplies will contract,” said U.S. Commodities analyst Don Roose.
Currently, U.S. meat packing plants will be closed at least one day each week during the Christmas and New Year’s holidays, reducing their need for cattle.
So far this week, packers paid $130 per hundredweight (cwt) for cash cattle in Texas and Kansas, $1 lower than last week, feedlot sources said (all figures US$). On Wednesday, sales of $129 to $130 were reported in Nebraska, down $1 to $2 from a week ago, they said.
Aside from limited packer demand weighing on cash prices, processors are faced with poor profit margins and sluggish wholesale beef demand.
The morning wholesale choice beef price, or cutout, dropped $1.65/cwt from Thursday to $196.06, and select cuts slid $1.61 to $187.17 in light sales volume, based on USDA data.
Beef packer margins for Friday were at a negative $43.30 per head, compared with a negative $51 per head on Thursday and a negative $54.40 per head a week ago.
CME live cattle received an added boost from fund buying after December and February broke through their respective 40-day moving averages of 132.251 cents and 133.496 cents.
December live cattle finished 0.725 higher at 132.525 cents per pound, and February ended at 133.9 cents, up 0.925 cent.
CME live cattle buying pulled up feeder cattle futures.
Feeder cattle for January closed at 166.975 cents, up 0.175 cent, and March finished 0.375 cent higher at 166.925 cents.
Nearby hog futures slip
February and April CME hogs posted modest losses in anticipation of lower cash hog prices as packers wind down for Wednesday’s holiday, traders and analysts said.
USDA’s morning direct hog prices were unavailable. Midwest hog brokers said cash hog prices traded $1/cwt lower as packer demand softened.
Friday morning’s wholesale pork prices came in higher, but are expected to fade amid ample supplies of heavy-weight hogs, traders said.
The government’s morning wholesale pork price, or cutout, gained 95 cents/cwt to $87.41, mainly due to the rebound in the price for pork bellies, which are made into bacon, USDA said.
CME hog investors sold nearby hog futures and bought 2014 spring and summer months with the view that the spread of the porcine epidemic diarrhea virus (PEDv), which is fatal to baby pigs, will hurt hog production during that period.
February hogs closed down 0.125 cent/lb. at 86.25 cents, and April ended at 91.175 cents, down 0.025 cent.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.