Chicago | Reuters — U.S. live cattle futures closed higher on Wednesday, bouncing off a four-month low on bargain buying along with broad-based strength in equity and commodity markets as fears subsided about the impact of the COVID-19 coronavirus outbreak in China.
The benchmark April live cattle futures contract on the Chicago Mercantile Exchange (CME) settled up 0.675 cent at 117.85 cents/lb. after dipping to 116.65, its lowest since Sept. 25 (all figures US$).
CME March feeder cattle futures rose 0.375 cent to settle at 135.05 cents/lb.
“It’s technically driven, speculative bargain hunting,” Doug Houghton, analyst with Brock Associates, said of the higher close.
Cattle futures followed as world equity markets scaled fresh highs after China reported the lowest number of new COVID-19 cases in two weeks, boosting hopes among traders that the epidemic will be contained.
Cash cattle traded in the southern Plains on Wednesday mostly at $119/cwt, the U.S. Department of Agriculture reported, steady with Tuesday’s light trade but down $2/cwt from last week.
But some traders said cattle futures were supported by the fact that cash values held at Tuesday’s price, instead of falling further.
“That kind of gave us a line on how hard it (cash trade) was going to fall off. The markets tended to relax a little because the worst-case scenario was avoided,” said Matthew Wiegand, commodity broker for FuturesOne.
However, sagging wholesale beef prices hung over the market, limiting rallies. The choice boxed beef cutout value fell $1.52, to $206.31/cwt, on Wednesday afternoon, while select cuts rose 77 cents to $205.30/cwt.
“The fundamentals are concerning … the choice-select spread is down to $1.01; that is not positive,” Houghton said.
CME lean hog futures closed mixed, with the most-active nearby contracts declining on weak cash hog and pork values.
CME April lean hog futures settled down 0.45 cent at 63.775 cents/lb.
“The problem there is continued large hog numbers. Slaughter is down a little bit from last weak but still way above a year earlier,” Houghton said.
The USDA reported Wednesday’s hog slaughter at 487,000 head, down from 496,000 a week ago but still well above the year-ago kill of 460,000 head. The week-to-date U.S. hog slaughter is running about nine per cent above the same period last year, Houghton noted, generating ample amounts of pork.
The U.S. pork cutout rose by 31 cents on Wednesday afternoon but cash hog prices in the closely watched Iowa and southern Minnesota market fell by 40 cents, according to USDA.
— Julie Ingwersen is a Reuters commodities correspondent in Chicago.