U.S. feeder cattle futures rose on Wednesday, hitting a three-and-a-half-month high fueled by a shortage of feeder cattle and advances in the live cattle market.
Chicago Mercantile Exchange (CME) spot October feeder cattle closed 0.85 cent higher, or 0.58 per cent, at 146.95 cents per pound. Most-actively traded November ended at 149.275 cents, 1.55 cents higher or 1.05 per cent (all figures US$).
Futures recovered after falling hard last week in response to corn that spiked following the government’s crop production report, said A+A Trading broker Jim Clarkson who also cited tight feeder cattle numbers.
CME feeder cattle received extra support from steady-to-higher cash feeder cattle prices at the most-watched Oklahoma City market.
Live cattle up again
CME live cattle rose each day this week as strong wholesale beef demand fueled anticipation for higher cash cattle prices.
Some investors also adjusted positions ahead of the U.S. Department of Agriculture monthly cattle-on-feed report on Friday (Oct. 19).
Analysts expect the data to show a big drop in the number of cattle placed in feedlots during September after the worst drought in more than 50 years sent feed costs to record highs last summer.
Spreaders sold October futures and bought December, lifting it beyond its 100- and 40-day moving averages of 127.12 and 127.6 cents which triggered fund buying.
Spot October closed up 0.575 cent/lb., or 0.46 per cent, to 126.125 cents. December ended at 127.6 cents, 0.925 cent higher or 0.73 per cent.
"Beef has been on fire which helped packer margins and put cash in a good position to trade higher," said Oak Investment Group president Joe Ocrant.
Isolated cash bids surfaced in the southern Plains at $122 per hundredweight (cwt) against $127 to $128 asking prices, said feedlots sources.
The wholesale price for choice beef Wednesday morning was 85 cents/cwt higher at $195.95 compared with Tuesday and select cuts were up 43 cents to $180.98, said USDA.
HedgersEdge.com estimated beef packer margin for Wednesday at negative $17.35 per head, compared with negative $26.65 on Tuesday and negative $33.70 for Oct. 10, according to HedgersEdge.com.
Hog futures rallied with the aid of the December contract’s discount to current cash hog prices, which some suspect could turn lower after packers complete buying for this week and wholesale pork demand slows.
"I believe that this hog rally is going to run out of steam sooner rather than later. I doubt the demand (pork) is going to continue at these levels, not with Thanksgiving and turkey demand right around the corner," said independent hog trader Dan Norcini.
February futures drew support from sentiment that hog supplies could tighten early next year after hog farmers last summer hurried their animals to market to avoid high feed costs.
December closed up 0.575 cent/lb., or 0.73 per cent, to 79.175 cents. February ended at 84.975 cents, up 0.550 cent or 0.65 per cent.
— Theopolis Waters writes for Reuters from Chicago.