Chicago | Reuters –– Chicago Mercantile Exchange live cattle futures marked a record high for a second straight day on Wednesday in anticipation of firmer prices for slaughter cattle this week, traders said.
October closed up 0.325 cent per pound at 166.1 cents, and December at 168.05 cents, up 0.2 cent (all figures US$).
Investors expect packers to bid up for cattle given the recent futures’ rally and much-improved beef cutout values, in part due to slaughter cutbacks.
Processors also hiked wholesale beef prices to realign their margins and offset last week’s higher cattle costs.
This week, feedlots in the U.S. Plains have priced their market-ready, or cash, cattle over $165 per hundredweight (cwt), with no bids from packers, feedlot sources said. Last week, cash cattle in the Midwest traded at mostly $162.
Wednesday afternoon’s choice wholesale beef price, or cutout, rose $2.67/cwt from Tuesday to $246.55. Select climbed $2.22 to $234.48, the U.S. Department of Agriculture said.
Beef packer margins for Wednesday were a negative $55.70 per head, compared with a negative $74 on Tuesday and a negative $74.25 a week ago, according to Colorado-based analytics firm HedgersEdge.com.
Expectations for tighter cattle numbers in the coming months boosted deferred CME live cattle contracts.
CME feeder cattle futures drew support from live cattle market buying. Traders cited the exchange’s feeder cattle index for Oct. 7 at 238.01 cents, up from 237.57 for Oct. 6.
October closed 0.85 cent/lb. higher at 242.325 cents, and November up 0.5 cent at 242.925 cents.
Hogs turn up
CME lean hogs ended higher, supported by short-covering on talk that profitable margins might allow some packers to keep a near-term floor beneath cash prices to fill out this week’s production, traders said.
October hogs closed up 0.9 cent/lb. at 108.125 cents, and December 0.825 cent higher at 95.175 cents.
USDA data showed Wednesday afternoon’s average hog price in Iowa/Minnesota was up 29 cents/cwt from Tuesday, at $108.23.
Market bulls worry that a seasonal supply increase of heavyweight hogs could ultimately pressure cash prices and create more pork tonnage.
From Monday to Wednesday, packers processed 1.279 million hogs, 61,000 more than last week, according to USDA.
Nonetheless, nearby futures’ discounts to CME’s hog index, at 109.91 cents, attracted buyers.
Fund buying surfaced after the December contract punched through the 10-day and 20-day moving averages of 94.61 cents and 95 cents.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.