Chicago | Reuters — Chicago Mercantile Exchange live cattle closed higher on Friday, boosted by short-covering following better-than-expected prices for market-ready or cash cattle, traders said.
“Futures played catch up with cash prices after packers built up enough margin to push for supplies this week. Folks are watching the cutout to see if it runs out of steam,” a trader said.
This week, cash cattle in Texas and Kansas moved at $148 per hundredweight (cwt), steady with last week, said feedlot sources (all figures US$). On Friday, cash cattle in Nebraska fetched $151 to $152, up $1 to $2 from a week ago, they said.
The morning’s wholesale choice beef price, or cutout, dropped 67 cents/cwt from Thursday to $240.63 in light sales volume. Select cuts slipped eight cents to $236.79, based on U.S. Department of Agriculture data.
Beef packer margins for Friday were estimated at a positive $34.55 per head, compared with a positive $24.80 on Thursday and a negative $26.70 a week ago, as calculated by HedgersEdge.com.
April live cattle closed 1.625 cents/lb. higher at 145.25 cents, and June ended at 137.85 cents, up 0.975 cent.
CME live cattle market gains led feeder cattle futures to new contract highs.
March ended up 0.625 cent/lb. at 174.6 cents, and hit a new contract high of 174.825 cents, in electronic trading.
April closed 1.3 cents higher at 177.225 cents after setting a fresh contract high of 177.575 cents.
Hogs firm after choppy day
CME hog futures posted modest gains as cash prices moved upward, trumping periodic profit-taking following recent spikes to new highs, traders said.
Investors bought the April contract, and at the same time sold deferred months, guided by continued upward trending cash hog prices.
Processors are having difficulty buying hogs as the deadly porcine epidemic diarrhea virus (PEDv) reduce the number of available supplies on U.S. hog farms.
On Friday, Smithfield Foods suspended hog slaughter at its Tar Heel, N.C. plant because PEDv has tightened hog supplies, industry sources said.
“Kill cuts by packers confirm the severity of the disease. But, it could also mean they won’t need as many hogs, which could hurt cash prices,” a trader said.
On Friday, packers processed an estimated 360,000 hogs, down 51,000 from last week and 59,000 fewer than a year earlier, according to USDA.
The government’s morning direct hog price data was not available. Hogs in the Midwest early on Friday traded $1 to $2/cwt higher, hog dealers said.
The surge in hog prices pushed CME’s lean hog index to its highest level ever at 109.16 cents, surpassing the previous record of 107.84 cents on Aug. 10, 2011.
April closed 0.375 cent/lb. higher at 119.3 cents, and peaked at a contract high of 119.9 cents. June finished up 0.25 cent to 127.85 cents after hitting a contract high of 128.375 cents.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.