Chicago | Reuters – Live cattle futures on the Chicago Mercantile Exchange closed higher on Tuesday, lifted by surging beef prices and rising packer margins that fueled expectations of firmer cash cattle prices this week, traders said.
CME October live cattle settled up 0.650 cent at 128.125 cents per pound, while September feeder cattle futures fell 0.150 cents to close at 163.050 cents per pound.
The wholesale beef market set the tone. Choice cuts topped $300 per hundredweight (cwt) on Tuesday for the first time since June, rising $5.52 to $305.32 per cwt, according to the U.S. Department of Agriculture. Select cuts rose $3.80 to $284.61 per cwt.
“It’s the strength in the beef market,” independent trader Dan Norcini said of Tuesday’s higher cattle futures. “It looks to me like these guys are expecting packers to put some better money on the table” to buy cash cattle, Norcini said.
Packers’ profit margins for cattle were nearly $700 per head, up from $559.05 a week ago, according to Denver-based livestock marketing advisory service HedgersEdge.com LLC. However, cash trade in market-ready cattle was quiet on Tuesday.
In the hog market, CME lean hog futures fell on fund-driven technical selling, along with fears of slowing pork exports to China and softening U.S. consumer demand.
CME October lean hogs settled down 0.775 cent at 83.875 cents per pound and December hogs fell 1.250 cents to end at 77.525 cents.
Large speculators seemed to be the biggest sellers, Norcini said. Commodity funds hold a net long position in lean hog futures, leaving the market vulnerable to bouts of long liquidation.
But bargain-buying emerged on Tuesday, helping to pare losses after the benchmark October contract dipped to 83.325 cents, its lowest since July 2.
“The October did finish negative on the day but there was a decent amount of buying coming in. There are probably guys who expect this fund selling to dry up soon,” Norcini said.
Wholesale pork prices fell on Tuesday afternoon. The USDA quoted the pork cutout at $122.40 per cwt, down $1.84 from the previous day.