U.S. livestock: Cattle bounce after this week’s four-month lows

Plentiful hog supplies drag on futures

CME April 2020 live cattle with 20-, 50- and 100-day moving averages. (Barchart)

Chicago | Reuters — U.S. live cattle futures closed higher on Friday on bargain buying after the benchmark April contract fell to a 4-1/2-month low this week, with traders citing expectations for a seasonal pickup in beef demand, traders said.

Benchmark April live cattle futures on the Chicago Mercantile Exchange settled up 1.8 cents at 120.325 cents/lb., pushing through resistance at the contract’s 200-day moving average near 120 cents (all figures US$).

CME March feeder cattle futures posted even larger gains, rising 2.2 cents to end at 138.525 cents/lb.

Commodity funds had been active sellers since late January of live cattle futures as well as other commodities amid fears about economic fallout from the coronavirus outbreak in China.

That fund-driven selling appeared to wane at mid-week, when open interest in CME live cattle futures began to increase after a three-week decline.

“Guys stepped back in and said, ‘The funds are probably done blowing out of positions.’ Wholesale beef prices are stabilizing, and we are coming into a time of year when seasonally demand begins to increase,” said Dan Norcini, an independent livestock trader.

“A lot of us think the selling was overdone,” Norcini said.

The choice boxed beef cutout value rose $1.64, to $208.09/cwt, on Friday afternoon, while select cuts rose $1.92, to $205.71/cwt.

CME lean hog futures closed modestly higher, with the bellwether April contract settling up 0.225 cent at 64.3 cents/lb.

Plentiful supplies of hogs and pork hung over the market, limiting rallies, as traders wait to see whether China will increase purchases of U.S. pork.

The U.S.-China Phase One trade agreement was due to go into effect 30 days after its Jan. 15 signing by U.S. and Chinese officials. Under the deal, China agreed to buy at least $200 billion in additional U.S. goods and services over two years, including $32 billion in additional imports of U.S. farm products.

The U.S. pork cutout fell by 35 cents on Friday afternoon, but cash hog prices in the closely watched Iowa and southern Minnesota market rose by 50 cents, according to USDA.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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