Cheaper corn drives CME feeder cattle to all-time high

Chicago Mercantile Exchange feeder cattle futures on Tuesday hit the highest level ever at US164.95 cents per pound, driven by cheaper feed that could encourage feedlots to buy young cattle.

Chicago Board of Trade corn for December delivery settled down 7-1/2 cents at $4.41-3/4 a bushel after reports of better-than-expected yields from the ongoing harvest in the U.S. Midwest (all figures US$).

Firm CME live cattle and steady-to-higher prices for feeder cattle in local markets contributed to the advance in futures, traders said.

October feeder cattle ended 0.8 cent/lb. higher at 164.8 cents. It spiked to a contract high of 164.95 cents in electronic trading earlier in the session.

November settled at 166.325 cents, up 0.85 cent.

Live cattle up with cash hopes

CME live cattle finished moderately higher as investors bought October and sold deferred months in anticipation of steady-to-higher cash prices this week, traders and analysts said.

They cited the seasonal improvement in wholesale beef demand and fewer cattle available for sale as supportive cash cattle influences.

October closed up 0.4 cent/lb. at 128.275 cents while December finished at 132.325 cents, up 0.025 cent.

Last week, cash-basis cattle in the U.S. Plains traded at $125 to $126 per hundredweight (cwt).

Tuesday’s wholesale choice beef price, or cutout, was up 26 cents/cwt from Monday to $192.59. The select price gained 37 cents to $177.80, according to analytical market research firm Urner Barry.

Some packers have curtailed slaughter to strengthen their weak margins and lift wholesale beef values.

Urner Barry estimated Tuesday’s cattle slaughter at 122,000 head of cattle, 1,000 less than last week and 5,000 fewer than a year ago.

The prospect that more affordable feed could increase cattle production pressured deep-deferred live cattle contracts.

Two-tiered hog trade on spreads

Some traders sold CME hog spot October futures and bought deferred months amid uneasiness about how that contract will settle when it expires on Oct. 14.

The CME Group on Monday detailed how it will determine the final settlement price for the October 2013 lean hog contract next week if the U.S. government shutdown continues.

Spot October also felt pressure from increased hog supplies which could drag down cash prices and wholesale pork values.

And speculative traders bought the December contract with the view that the USDA’s recent quarterly hogs report did not factor in losses from the porcine epidemic diarrhea virus
(PEDv), which is deadly to baby pigs.

Spot October finished at 91.225 cents/lb., down 0.375 cent. December closed up 0.325 cent at 88.2 cents.

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

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