U.S. livestock: Bargain hunting pares CME live cattle losses

(Photo courtesy Canada Beef Inc.)

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures ended higher on Tuesday, driven by short-covering and bargain-hunting that helped contracts recover some of their lost ground over the past two sessions, traders said.

February live cattle ended 1.75 cents/lb. higher at 129.3 cents, and April closed up 1.65 cents, to 130.15 (all figures US$).

CME live cattle will return to their normal three cents/lb. daily price limit on Wednesday after failing to settle at the newly expanded 4.5-cent limit on Tuesday.

CME live stock contracts were significantly oversold following U.S. stock market futures’ recent selloff, slumping global equities markets and softer wholesale beef prices, said U.S. Commodities analyst Don Roose.

Furthermore, futures were undervalued based on last week’s market-ready (cash) cattle prices.

A week ago, cash in the U.S. Plains brought $132-$134/cwt, said feedlot sources.

Tuesday morning’s wholesale beef price, or cutout, dropped 68 cents/cwt from Monday, to $230.60. Select cuts sagged 45 cents to $224.49, the U.S. Department of Agriculture said.

Cash cattle sellers may experience pushback later this week from processors whose margins were trimmed by fallen cutout values.

The average beef packer margin for Tuesday was $99.60 per head, down from $115.70 for Monday and $140.55 a week ago, as calculated by consultancy HedgersEdge.com.

Technical buying developed February and April live cattle contracts filled a major chart gap left by Friday’s high and Thursday’s low.

Live cattle futures’ turnaround boosted CME feeder cattle. January closed at 156.55 cents/lb., 2.25 cents higher and will revert to the original 4.5-cent limit from the expanded 6.75 cents limit.

Hog futures up with fundamentals

CME lean hogs drew strength from the morning’s higher cash and wholesale pork prices, traders said.

Spot February closed 0.825 cent/lb. higher at 62.85 cents, and April ended up 0.275 cent, to 67.725 cents.

The government reported the morning’s wholesale pork price at $74.63/cwt, $1.13 higher than on Monday, led by the almost $4 leap in loin costs.

On Tuesday morning, packers in Iowa/Minnesota on average paid $53.32 for hogs, $2.33 higher than on Monday.

Seasonally tight supplies and profitable margins encouraged processors to actively fill inventories, a regional hog buyer said.

Fewer hogs, and some plants that were closed over the U.S. Martin Luther King Jr. Day holiday, reduced near-term pork supplies, which stirred retail demand, a trader said.

Theopolis Waters reports on livestock markets for Reuters from Chicago.

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