U.S. live cattle futures posted modest gains on Wednesday as rising wholesale beef prices offered optimism for at least steady cash cattle prices, said analysts and traders.
Chicago Mercantile Exchange (CME) hogs also closed moderately higher and feeder cattle settled steady to firm.
Live cattle at the CME edged upward from the start, lifted by the stock market’s short-lived rally from the previous day’s big losses.
Cattle futures gained more ground in response to the wholesale choice beef price that surpassed last spring’s highs and is poised to challenge the "magical" $200 mark (all figures US$).
The wholesale price for choice beef Wednesday morning was 88 cents per hundredweight (cwt) higher than Tuesday to $199.40, according to the U.S. Department of Agriculture.
It topped the 2012 February high of $198.89 and is on track to break the $200 barrier for the first time since $201.18 on Oct. 16, 2003.
While some analysts attributed the increase to tighter cattle numbers following back-to-back droughts, others cited some packers that cut their slaughter rates in an effort to recoup lost margins.
"People are telling us cash could be steady at worse, and maybe $1/cwt higher, because wholesale beef is still holding its ground," said Allendale Inc. chief strategist Rich Nelson.
Cash cattle bids in the southern Plains were at $124/cwt against $128 and higher asking prices, said feedlot sources.
Spot October live cattle closed up 0.2 cent/lb., to 126.2 cents. Most-actively traded December ended at 127.075 cents, up 0.225 cent.
CME feeder cattle ended steady to firm with spot October traders tracking the exchange’s feeder cattle index at 145.13 cents. The contract will expire on Thursday.
Other trading months firmed amid live cattle market advances and higher cash feeder cattle values.
Spot October feeder cattle closed unchanged at 145.425 cents/lb. Most-actively traded November ended at 147.175 cents, up 0.125 cent.
Hog futures firmed on December future’s discount to cash prices that some contend could turn lower as pork demand slows and hog supplies remain plentiful, said analysts and traders.
There is some concern about cash prices given wholesale pork values were down three out of the last four days, said Nelson.
Remaining months were buoyed by expectations for tighter hog supplies in 2013 after producers in recent months moved hogs ahead of schedule due to high feed costs.
December closed 0.125 cent/lb. higher at 78.25 cents. February ended at 84.675 cents, up 0.025 cent.
— Theopolis Waters writes for Reuters from Chicago.