U.S. live cattle futures turned higher on Tuesday, aided by short-covering and an unexpected spike in wholesale beef prices, said analysts and traders.
Also, feeder cattle at the Chicago Mercantile Exchange closed higher but hogs finished flat to weak.
Initial CME live cattle gains were tied to short-covering and lack of deliveries posted by the exchange Monday evening, a trader said.
"But it was the pop in the cutout that caught my attention, suggesting last-gasp meat buying by retailers for the Labour Day holiday," he said. "After that, I look for beef prices to head back down again."
The U.S. Department of Agriculture estimated Tuesday morning’s choice wholesale beef price, or cutout, at $193.22 per hundredweight (cwt), up $1.24 from Monday but down 63 cents from their recent high on Aug. 20 of $193.85 (all figures US$).
Live cattle futures investors are also monitoring the progress of Hurricane Isaac and its possible impact on meat demand in areas most affected by the storm ahead of the Labour Day holiday on Sept. 3.
"It’s our last big meat movement three-day weekend of the summer and most of the buying is already done. But, the reality is, there can be some shipment problems and some softness in consumer demand," said Livestock Market Information Center director Jim Robb.
Traders also await the sale of cattle in the cash market, which could offer direction to the October trading month that is waiting to assume lead-month duties after August expires from trading on Friday.
Packers have not bid for cattle and feedyards have yet to price their animals.
Spot August live cattle closed up 0.425 cent per pound to 118.825 cents. Most-actively traded October ended at 123.750 cents, up 0.275 cents.
CME feeder cattle drew support from modest live cattle market advances and higher cash feeder cattle prices in the most-watched Oklahoma City market.
Futures buyers also cited weaker corn prices, which could help generate feedlot demand for younger cattle.
Spot August feeder cattle, which will expire on Thursday, closed up 0.025 cent/lb. to 140.3. It was at a slight premium to CME’s feeder cattle index at 139.94 cents.
Most-actively traded September finished 0.95 cent higher at 143.6 cents.
Hogs flat to weak
CME hogs finished flat to weak as cash prices continued to trend lower, reflecting plentiful supplies and lacklustre wholesale pork demand, said analysts and traders.
October hogs closed unchanged at 73.250 cents/lb. December finished 0.3 cent weaker at 70.75 cents with February down 0.25 cent at 78.75 cents.
Packers also need fewer hogs as the industry winds down for the Labour Day holiday weekend.
So far this week, an estimated 863,000 hogs were processed, up 16,000 from last week and 24,000 more than for the same period a year ago.
"The surprisingly large supply we’ve had in recent weeks may be implying some additional featuring in grocery stores and restaurants than we thought might occur a few months from now," said Robb.
Some attributed the buildup in hog numbers to bouts of extreme summer heat that delayed marketings. Others pointed to producers hurrying hogs to market ahead of schedule to avoid feeding them corn at record high prices after the worst drought in the United States in more than 50 years damaged drops.
— Theopolis Waters writes for Reuters from Chicago.