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U.S. livestock: Tight supply outlook rallies CME feeder cattle to new high

Strong CME live cattle futures settlement

Chicago | Reuters — Chicago Mercantile Exchange feeder cattle futures on Monday clocked a new high for a fourth straight session, partly driven by expectations for tighter numbers of calves ahead, traders said.

Feedlots are spending more for calves, or feeder cattle, made scarce after several years of drought in the U.S. sent the herd to a 63-year low.

Fund buying and lower corn prices contributed to CME feeder cattle advances that some traders believe are close to topping out soon.

Despite cheaper corn and higher returns for feeders, feedlots are buying calves at a loss if market-ready cattle prices are unable to move higher, a trader said.

May closed 1.175 cents per pound higher at 188.475 cents, and August ended up 2.875 cents at 196.2 (all figures US$).

September and October settled up the three-cent limit at 197.3 and 197.375, respectively.

CME live cattle futures ended up sharply, driven by short-covering and higher wholesale beef prices, traders said.

The Monday morning wholesale choice beef price rose $1.32 per hundredweight (cwt) from Friday to $227.30. Select cuts gained 29 cents to $217, the U.S. Department of Agriculture said.

Fund buying and futures’ price discount to last week’s returns for slaughter-ready, or cash, cattle enhanced market advances.

Last week, cash cattle in Texas and Kansas, on average, traded at $145/cwt, with sales of $148 in Nebraska.

Friday’s neutral to mildly bullish USDA monthly cattle-on-feed report helped reverse initial front-month selling and underpinned deferred contracts. [Related story]

USDA’s data on Friday showed last month’s cattle placements down five per cent after years of drought in parts of the country led to fewer animals for feedlots to draw from.

Investors await this week’s cash cattle prices that may feel pressure from limited supply needs as packers throttle back production ahead of the U.S. Memorial Day holiday.

June closed up 1.5 cents/lb. at 139.4 cents. August closed 2.175 cents higher at 140.55.

Speculative buying lifts hogs

CME hogs settled higher on speculative buying in anticipation of tight supplies pegged to the porcine epidemic diarrhea virus (PEDv), traders said.

Futures firmed despite lower cash hog prices as processors cut kills to offset PEDv-related production losses. Most packing plants will be closed on Monday for the holiday.

The morning’s average hog price in the Iowa/Minnesota market fell 60 cents/cwt from Friday to $108.30, according to USDA.

Reduced slaughters pushed up the morning’s wholesale pork values by 87 cents per cwt from Friday to $115.06 cents.

Investors on Tuesday will mull Monday’s cash price slip against tight supply expectations.

June finished up 0.45 cent at 119.375 cents, and July 0.425 cent higher to 125.675.

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

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