U.S. live cattle futures rallied on Monday, lifted by strong wholesale beef demand and last week’s price hike for cash cattle, analysts and traders said.
Chicago Mercantile Exchange (CME) hogs closed higher and feeder cattle posted sharp gains.
CME live cattle turned upward as wholesale beef prices continued to rise with supermarkets buying product for the Labour Day holiday Sept. 3, traders said.
Spot August closed up 1.225 cents, or 1.02 per cent, at 121.825 cents per pound. Most-actively traded October ended 0.85 cent higher, or 0.68 per cent, at 126.375 cents (all figures US$).
The wholesale choice beef price Monday morning was estimated at $186.09 per cwt, up $1.14 cents from Friday and $7.54 higher than a week ago, according to the U.S. Department of Agriculture.
Packers were in the market for cattle last week amid tight supplies, paying mostly $119 per cwt or $1 higher than the
previous week’s trade.
The bullish response to cash and wholesale beef prices caused traders who had been recently short the market to cover
their positions, a trader said.
Some spreaders bought spot August and sold deferred months despite the potential threat of more deliveries before the spot month expires on Aug. 31.
Feeder cattle futures closed sharply higher. September hit its three-cent daily trading limit as profit-taking sank corn prices.
Less expensive corn may reduce input costs enough for cattle feeding operations to purchase younger cattle.
Feeder cattle futures also drew support from the higher CME live cattle market.
Spot August feeder cattle closed up 1.975 cents per pound, or 1.42 per cent, at 141.45 cents. Most-actively traded September closed at 142.675 cents, up 2.95 cents or 2.11 per cent.
Hog futures settled higher, partly in response to plans by the Obama administration to buy up to $170 million of fish and meat for government food aid programs to help livestock producers hurt by the drought.
CME hog buyers were also drawn to future’s discount to the exchange’s lean hog index at 93.29 cents. The August contract will expire on Tuesday at noon CDT.
"It’s the psychology. You get August off the board and suddenly October seems cheap," said Pete Adams, principal with PNM Trading.
Spot August closed up 0.075 cent, or 0.08 per cent, at 91.95 cents/lb. and October ended 1.525 cents higher, up 2.02 per cent, at 77.05 cents.
December hogs finished up 1.525 cents, 2.08 per cent, at 74.95 cents.
Spreading into October out of deep deferred months helped push October through the 10-day moving average of 76.83 cents, touching off fund buying.
— Theopolis Waters writes for Reuters from Chicago.