U.S. livestock: CME live cattle futures end mostly firm

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures settled mostly firm on Wednesday after investors sold the February contract and bought back months as wholesale beef prices declined, traders said.

The afternoon’s wholesale choice beef price, or cutout, was $232.49 per hundredweight (cwt), $3.99 lower than on Tuesday, and select cuts fell $3.24 to $230.43, according to U.S. Department of Agriculture data (all figures US$).

Even though the cutout is starting to come down, the retail value of beef is still profitable for packers who need slaughter cattle, said Paul Georgy, president of Allendale Inc.

“Futures should be well supported unless we see a tremendous drop in cash prices,” he said.

Cash cattle bids surfaced in Texas and Kansas at $146/cwt, against asking prices of $150 from sellers, feedlot sources said. On Monday, a small number of cash cattle in Texas traded at $146, about $1 lower than a week ago for the state, they said.

Last week, most cattle in the U.S. Plains sold up to $150, a record high.

Processors may avoid spending more for cattle this week as slipping wholesale beef costs wear down their operating margins. More cattle for sale could pressure cash returns.

Traders await the government’s annual cattle inventory report that will be issued on Friday.

Analysts expect Friday’s data to show the U.S. cattle herd likely fell for a seventh straight year, but the rate of that decline possibly slowed and suggests ranchers are rebuilding their herds as feed costs ease.

February live cattle closed 0.475 cent/lb. lower at 142.075 cents. April ended up 0.175 cent to 140.525 cents and June finished at 132.075 cents, 0.275 cent higher.

CME January feeder cattle closed up 0.375 cent/lb. to 171.8 cents, guided by the exchange’s feeder cattle index at 171.61 cents. The contract will expire on Jan. 30.

Remaining feeder cattle contracts drew support from weaker corn prices and firm deferred-month CME live cattle futures.

March ended 0.85 cent higher at 169.225 cents, and April finished up 0.575 cent to 169.475 cents.

Hogs jump on technical buying

CME hog futures turned higher as bullish spreads lifted the February contract beyond where the 10-day and 20-day moving resistance level converged at 86.038 cents, traders said.

They said mixed, rather than lower cash prices, encouraged more February futures buying.

February hogs closed at 86.525 cents/lb., 1.25 cents higher, and April ended at 93.8 cents, up 0.225 cent.

CME February hogs gained traction despite weak wholesale pork values. Also, more hogs are expected to reach packing plants after recent wintry weather backed them up on farms.

Government data on Wednesday afternoon showed the wholesale pork price at $89.87/cwt, down 22 cents from Tuesday.

Wintry weather on the East Coast forced the temporary shutdown of packing plants in the region, analysts and traders said. Those plants will make up the downtime on Saturday, they said.

USDA estimated Wednesday’s hog slaughter at 374,000 head, 40,000 fewer than a week ago and down 44,000 from a year earlier.

Speculation that the spread of the porcine epidemic diarrhea virus, which is fatal to baby pigs, could hurt pork production this summer sent the June and July contracts to highs.

— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.

Related story:
Fourth Ont. hog farm hit by diarrhea virus, official says, Jan. 29, 2014

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