U.S. livestock: Cattle pull back after Monday rally

CME February 2020 live cattle with Bollinger (20,2) bands. (Barchart)

Chicago | Reuters –– U.S. live cattle futures eased on Tuesday in a profit-taking setback from the prior session’s steep jump after weeks of rising cattle prices that have eroded beef packer margins.

Live cattle futures were due for a pullback after scaling to an 8-1/2 month peak last week on strong beef demand and tightening cattle supplies, analysts said.

Beef prices flattened on Tuesday and investors are now awaiting the next wave of cash feedlot cattle trading in the U.S. Plains later this week. Cash prices jumped $2/cwt last week (all figures US$).

“In the absence of confirmed cash trade to move us higher and not a lot of action in the boxed beef, we saw cattle level off here. But we’re still consolidating at a higher level here as we return for the first full week of the new year,” said Matthew Wiegand, commodity broker for FuturesOne in Lincoln, Nebraska.

The choice boxed beef cutout shed nine cents to $209.56/cwt on Tuesday and the select cutout was two cents higher at $206.82, according to the U.S. Department of Agriculture (USDA). Both categories jumped by more than $1 on Monday.

Average beef packer margins stood at just $12.85 a head on Tuesday, well below $37.20 a week ago and $171.05 per head a month ago, according to livestock marketing and advisory service HedgersEdge.com LLC.

Chicago Mercantile Exchange (CME) February live cattle futures fell 0.75 cent to 126.525 cents/lb. following Monday’s two per cent gain that was the strongest in nearly four months.

Feeder cattle futures also retreated after a strong start to the week, with actively traded March futures down 1.225 cents at 145.125 cents/lb.

Lean hog futures ended higher on Tuesday, clawing back more of Friday’s sharp losses as traders awaited fresh export sales data due later this week and anticipated further pork sales to China.

CME February lean hog futures ended up 0.6 cent at 69.225 cents/lb.

The U.S. and China are due to sign a Phase One trade deal next week that U.S. officials say will sharply increase Chinese imports of U.S. farm goods. Pork is expected to feature prominently in the accelerated buying as China’s hog herd has been decimated by African swine fever.

China will release another 20,000 tonnes of frozen pork from state reserves this week ahead of the Lunar New Year holiday, China’s Merchandise Reserve Management Center said.

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

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