Reuters — Chicago Mercantile Exchange live cattle futures rose almost 2 per cent on Tuesday, fueled by short-covering in response to record-high beef prices, traders said.
Tuesday morning’s wholesale price for choice beef surged $3.07 per hundredweight (cwt) from Monday to an all-time high of $253.59. Select beef climbed $2.10 to a record $246.18, according to the U.S. Department of Agriculture.
Meat demand remains strong as milder-than-usual mid-summer temperatures extended grilling beyond the U.S. Fourth of July holiday weekend. Grocers are also competing for less product after packers cut slaughters while adjusting to fewer available animals.
Futures garnered more support from expectations that packers will spend more for market-ready, or cash cattle, this week given tight supplies.
Feedlots will likely take less money for their animals this week based on profitable packer margins.
“A lot of this for cattle is coming from ideas early in the week that cash would be steady to weaker, to now probably $1 to $2 higher,” said R.J. O’Brien floor manager Jim Brooks.
Last week, cash cattle in Texas and Kansas sold at mostly $155 per cwt, with sales of $156 to $157 in Nebraska.
Beef packer margins for Tuesday were at positive $40.90 per head, compared with a positive $21.15 on Monday and a positive $35.55 a week ago, as calculated by industry analytics firm HedgersEdge.com.
In a trading strategy known as bull spreads, investors bought August futures and simultaneously sold deferred contracts guided by positive market fundamentals.
The government’s monthly cold storage report, which will include total June beef and pork inventories, will be issued on Tuesday at 2 p.m. CDT (1900 GMT).
August live cattle finished up the 3.000-cents per lb daily price limit at 155.950 cents, and October 2.625 cents higher at 157.875.
Nearby CME feeder cattle contracts closed limit up with help from fund buying, weaker corn prices and higher live cattle futures.
August and September ended 3.000 cents per lb higher at 216.025 cents and 216.775 cents, respectively.
Hogs up with cattle futures
CME hogs drew spillover support from buying in the live cattle market, traders said.
Bargain hunting after recent market losses contributed to hog futures gains. August led advances pegged to its discount to CME’s hog index at 133.16 cents.
Investors wait to see whether cash hog prices can break out of their recent slump as packers buy supplies for the rest of this week’s production.
The government’s morning direct hog price data was unavailable. Cash hogs early Tuesday traded steady to $1 per cwt lower than on Monday, Midwest hog dealers said.
Theopolis Waters writes for Reuters news service in Chicago