U.S. livestock: Cattle gain on strong packer margins

Profit-taking sinks hogs

CME August 2021 live cattle (candlesticks) with 20- and 100-day moving averages (dark red and black lines) and CME July 2021 lean hogs (pink line). (Barchart)

Chicago | Reuters — Chicago Mercantile Exchange (CME) cattle futures firmed on Friday on strong beef plant margins and good demand from packers for fed cattle, traders said.

Cash beef prices have flattened after a prolonged run higher, but packers continue to make a large profit on each animal slaughtered.

“We’re probably seeing that our boxed beef prices at a seasonal peak. But while that trends lower, there’s still incredible margins,” said Matthew Wiegand, broker with FuturesOne.

The choice boxed beef cutout value dipped 69 cents, to $337.56/cwt, while the select cutout dropped $5.19, to $305.21/cwt, according to the U.S. Department of Agriculture (all figures US$).

But the average beef packer margin rose to $896.70 per head on Friday, up from $752.50 a month ago and just $317.50 a year ago, according to advisory service HedgersEdge.com.

CME August live cattle futures ended up 1.475 cents at 120.025 cents/lb. August feeder cattle gained 2.775 cents to settle at 151.175 cents/lb. as Chicago Board of Trade corn futures plunged.

Unwinding of cattle/hog spreads further buoyed cattle prices while pressuring lean hog futures, Wiegand said.

Hogs also retreated on Friday on profit taking ahead of the weekend and after several contracts posted life-of-contract highs this week.

Some traders believe that hog prices may have reached a near-term peak as average animal weights have risen in the closely followed Iowa and southern Minnesota market at a time when weights typically decline seasonally.

Meanwhile, falling hog prices in China amid an expanding hog herd there have sparked concerns that import demand for U.S. pork would soften in coming months, traders said.

CME July hog futures fell 1.35 cents, to 119.975 cents/lb., and August futures dropped 1.725 to 116.975 cents.

— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago.

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