U.S. live cattle futures rally into USDA report

Chicago Mercantile Exchange (CME) live cattle rallied, driven in part by positioning ahead of Friday’s U.S. Department of Agriculture monthly cattle-on-feed report, traders and analysts said.

Analysts expect the report to show fewer cattle placed in feedlots in May as feed costs rose and grazing land improved.

USDA will simultaneously issue its monthly cold storage report showing total May beef and pork inventories.

CME live cattle June and August contracts punched through their 40-day moving averages of 120.642 cents and 120.249 cents, respectively. The move touched off fund buying and short-covering.

In after-hours trading, live cattle futures were poised to end up almost two per cent for the week.

June finished up 1.3 cent per pound to 121.25 cents; August closed 1.6 cents higher, at 121.6 cents.

“The rally is more short-covering than anything else after we went above the moving averages,” Oak Investment Group president Joe Ocrant said.

Traders waited for cattle in the cash market to trade.

So far, cash-cattle bids in the U.S. Plains were at $117 per hundredweight (cwt) versus $120 asking prices. Cash-basis cattle last week fetched $120.

Ample cattle supplies could weigh on cash prices, traders and analysts said. Futures’ rally and the beef cutout uptick may minimize potential cash losses, they said.

The government’s Friday morning data showed the wholesale price of choice beef, or cutout, at $199.54/cwt, which was up 24 cents from Thursday. Select cuts gained 53 cents to $186.41.

Live cattle market advances and technical buying boosted CME feeder cattle.

Traders also cited weak corn prices that could ease input costs for cattle feeding operators.

Feeder cattle are set to finish the week up more than two per cent.

August settled 2.5 cents/lb. higher at 146.925 cents, and September was at 149.15 cents, or 2.4 cents higher.

Hogs fall on profit-taking

Hog futures dropped on profit-taking in anticipation of possibly lower-trending cash hog prices next week, traders and analysts said.

Government data showed the average hog price on Friday morning in the most-watched Iowa/Minnesota hog market at $101.46/cwt, up 68 cents from Thursday.

Packers will need less hogs with plants scheduled off for at least one day during the July 4 U.S. Independence Day holiday, a trader said.

He said processors may be reluctant to raise cash hog bids after supermarkets finish buying pork for holiday grilling features.

Friday morning’s government mandatory wholesale pork price report, calculated on a plant-delivered basis, was at $107.71/cwt, $1.54 higher than Thursday, according to USDA.

CME hogs appeared headed for a weekly drop of more than one per cent, the first weekly decline in four weeks.

CME July hogs settled down 0.5 cent/lb. to 99.75 cents. August settled 0.825 cent lower at 97.45 cents.

— Theopolis Waters reports for Reuters from Chicago.

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