Chicago Mercantile Exchange live cattle futures on Tuesday closed higher after wholesale beef prices notched another record high fueled by grilling demand and tight supplies, said traders and analysts.
Supermarkets are also close to booking fresh beef for the May 25 to May 27 U.S. Memorial Day holiday backyard cookouts.
U.S. Department of Agriculture data on Tuesday morning showed the wholesale price of choice beef, or cutout, up 21 cents to $210.46 per hundredweight (cwt), besting the previous record of $210.25 set late on Monday (all figures US$).
“Beef demand has not given up and finally futures are taking notice,” said Oak Investment Group president Joe Ocrant.
CME live cattle futures’ upswing lifted June and August above their respective 10-day moving averages of 120.31 and 120.02 cents, triggering speculative and fund buying.
June cattle closed at 121.1 cents, up 0.975 cent per pound and August ended 1.225 cents higher at 120.375 cents.
Futures’ rise stirred expectations for cash cattle to trade steady with last week’s $124 to $126.50/cwt. So far there were no cash bids or asking prices reported, said feedlot sources.
Beef cutout’s record-setting pace and expanding packer operating margins could underpin cash prices this week.
HedgersEdge.com calculated U.S. beef packer margins on Tuesday at a positive $83.25 per head, compared to a positive $73.20 on Monday and a positive $40.85 a week ago.
However, packing plants will be closed on Monday for the three-day U.S. Memorial Day holiday weekend, reducing their need for cattle.
CME feeder cattle spot-May closed 0.625 cent/lb. lower at 131.9 cents. It was guided by ideas about where the contract will settle after it expires on May 23.
Lower prices for cash feeder cattle in the most-watched Oklahoma City market pressured spot-month futures.
Other more actively-traded feeder cattle contracts followed CME live cattle higher.
August settled at 146.475 cents, two cents higher and September finished 2.075 cents higher at 148.9 cents.
Hogs gain with cattle
CME hogs drew support from the higher live cattle market, said traders and analysts.
Hog futures at times follow the live cattle market because beef is a competing meat, a trader said.
And grocery shoppers may switch from high-priced beef compared to relatively inexpensive pork even though wholesale pork prices rose on Tuesday, he said.
USDA’s Tuesday morning mandatory wholesale pork price or cutout calculated on a plant-delivered basis, was $93.48/cwt, up 68 cents from Monday.
June hogs closed up 0.325 cent/lb. to 92.4 and July ended at 91.75 cents, or 0.225 cent higher.
Nonetheless, traders sold into rallies in anticipation of cash hog and wholesale pork prices peaking soon as hog numbers begin to increase seasonally.
The average hog price on Tuesday in the western Midwest market was down 76 cents/cwt from Monday to $88.89, according to USDA data.
Packing plants will be closed for Monday’s holiday, limiting their need for supplies. And unprofitable margins will prompt some packers to curb Saturday’s slaughter.
U.S. pork packer margins on Tuesday were estimated at a negative $2.55 per head, compared to a negative 95 cents on Monday and a negative $5.55 a week ago, according to HedgersEdge.com.
Investors continue to monitor developments after U.S. government and industry veterinary officials recently detected cases of porcine epidemic diarrhea virus (PEDV) in Iowa and Indiana hog herds.
PEDV does not pose a human health or food safety risk and pork is safe to eat, a USDA spokesman said.
— Theopolis Waters reports for Reuters from Chicago.