U.S. livestock: Cash price unease drags on CME live cattle

(Photo courtesy Canada Beef Inc.)

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures finished lower on Monday, pressured by uncertainty over cash prices later this week, traders said.

February live cattle closed 0.65 cent/lb. lower at 132.225 cents, and April ended down 0.775 cent, to 133.05 cents (all figures US$).

Typically, cash bids surface around midweek. But a major processor in Texas on Monday bid $132-$133/cwt for market-ready, or cash, cattle, feedlot sources said.

Last week, cash cattle in the U.S. Plains sold at $131-$133/cwt, down as much as $3 from the previous week.

Market bulls said the early-week cash bid suggests the packer may need supplies while taking advantage of its highly profitable margins and surging wholesale beef values.

Bearish traders point to almost 32,000 more cattle for sale than last week, and the possibility that soaring wholesale beef values may soon stall.

Monday afternoon’s wholesale choice beef price climbed $3.12/cwt from Friday, to $235.32. Select cuts rose $2.09, to $229.07, based on U.S. Department of Agriculture data.

The average beef packer margin for Monday was $109.60 per head, up from $75.15 for Friday and a negative $11.90 a week ago, as calculated by consultancy HedgersEdge.com.

“Cheaper cattle and high-priced beef worked wonders for packer margins,” a trader said.

Funds sold the February contract, and simultaneously bought deferred months, tied to the Standard + Poor’s Goldman Sachs Commodity Index (S+PGSCI).

Monday was the second of five days of the process known as the S+PGSCI “roll.”

At the same time, some index funds bought CME livestock contracts as part of their annual rebalancing of commodity holdings.

Lower corn futures underpinned the January CME feeder cattle contract. But other months felt pressure from sharply lower cash prices for feeder cattle.

January feeders closed up 0.025 cent/lb. to 159.45 cents. March dropped 0.525 cent to 156.8, and April was 0.575 cent lower at 156.8 cents.

Mainly firm hog market settlement

Most CME lean hog months ended firm after funds rolled February positions into back months, traders said.

Spot February finished down 0.15 cent/lb. to 59.7 cents. April ended 0.25 cent higher at 65.475 cents, and May up 0.15 cent, to 73.25 cents.

The lack of clear cash and wholesale pork price direction kept market participants on the defensive.

Technical issues at Smithfield Foods has affected hog production at a number of its facilities, a company spokeswoman said Monday.

Theopolis Waters reports on livestock markets for Reuters from Chicago.

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