Chicago | Reuters — Chicago Mercantile Exchange live cattle futures finished sharply higher on Monday, erasing early-session losses as they gained on short-covering and fund buying before the end of the quarter on Tuesday, traders and analysts said.
October live cattle closed up 2.5 cents per pound at 160.95 cents, and December was 2.375 cents higher at 164.475 cents (all figures US$).
In a trading strategy known as bull spreads, investors simultaneously bought October and sold back months, which put October at a slight premium to last week’s cash cattle prices.
Last Friday, a light number of market-ready, or cash, cattle in Nebraska moved at $157 to $159 per hundredweight (cwt), which was steady to mixed compared with the week before, according to the U.S. Department of Agriculture.
Late last week, a small number of cash cattle in Kansas sold at $158/cwt, down $1 from the previous week, said USDA.
Some processors needing cattle for near-term production, in combination with recently improved wholesale beef demand, might underpin cash prices for this week, traders said.
However, other packers may continue to reduce cash cattle bids given their poor margins and available animals contracted against the futures market.
Monday’s beef packer margins were a negative $91.20 per head, compared with a negative $83.70 on Friday and a negative $83.20 a week ago, according to Colorado-based analytics firm HedgersEdge.com.
The afternoon’s choice wholesale beef price was up 36 cents/cwt from Friday to $238.02. Select rose $1.35 to $226.83, USDA said.
CME feeder cattle reached a record high for a second straight session on fund buying and strong live cattle futures.
October closed 1.55 cents/lb. higher at 234.65 cents, and November at 234.5 cents, up 2.9 cents.
Nearby hogs up, others down
CME October hogs drew support from speculation that some packers might maintain at least steady bids for cash hogs as long as their margins and pork demand co-operate, a trader said.
However, some investors worried that cash hog prices will trend lower as supplies begin to grow seasonally.
Monday afternoon’s average hog price in Iowa/Minnesota Midwest slipped 46 cents/cwt from Friday to $108.44, USDA said.
HedgersEdge.com estimated pork packer margins for Monday at a positive $15.95 per head, compared with a positive $18.70 on Friday and a positive $10.80 a week ago.
The government’s data showed the afternoon’s wholesale pork price jumped $2.06/cwt from Friday to $120.69.
Traders sold deferred hog months based on Friday’s bearish USDA quarterly hog report, which showed that high-priced hogs and low-cost feed had encouraged producers to expand their herds.
October hogs closed 0.8 cents/lb. higher at 107.325 cents and December up 0.375 cent at 94.85 cents.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.