Chicago | Reuters — Chicago Mercantile Exchange live cattle settled higher on Friday, driven by short-covering in response to strong preliminary cash prices, traders said.
April closed 1.375 cents per pound higher at 154.65 cents, and June ended up 1.075 cents at 147.1 cents (all figures US$).
A small number of market-ready (cash) cattle in Nebraska fetched $162 per hundredweight (cwt), up as much as $4 from last week, feedlot sources said.
Sellers in Kansas held out for more money after packers hiked bids to $162/cwt, they said. Last week, cash cattle in the U.S. Plains moved mostly at $158 to $160.
“Packers are pulling heavily on their contracted cattle, but will have to step into the spot market arena quickly,” said Livestock Marketing Information Center director Jim Robb.
Packers needed cattle after not buying enough last week and as numbers tighten seasonally, a trader said. And feedlots were not going to take less money, given profitable packer margins, he said.
Higher cash prices stirred periodic bull spreads, in which investors bought the April contract and at the same time sold back months.
Bull spreads overtook funds involved in CME’s livestock markets that sold or “rolled” some of their April positions and simultaneously bought deferred contracts. The strategy is known as the “roll” and is tied to the Standard + Poor’s Goldman Sachs Commodity Index (S+P GSCI).
Friday was the first of five days for the S+P GSCI roll procedure.
CME feeder cattle contracts drew support from live cattle market buying and softer corn futures.
The exchange’s feeder cattle index rise for March 5 to 207.66 cents from 206.66 cents for March 4 encouraged buyers.
March closed 3.15 cents/lb. higher at 209.725 cents, while April ended up 3.2 cents to 208.575 cents.
Hog futures struggle
Technical selling and uneasiness about near-term cash prices as packers fight to conserve tight margins pressured CME lean hog futures, traders said.
April closed 0.7 cent/lb. lower at 66.125 cents, and June down 0.2 cent to 77.25 cents.
Packers are cautious about spending more for hogs when they are unable to consistently move product at higher prices, a trader said.
Friday morning, cash hogs in the Midwest sold steady to $1/cwt lower, according to regional hog dealers.
The morning’s wholesale pork prices gained 31 cents/cwt to $68.58 from Thursday, the U.S. Department of Agriculture said.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.