Chicago | Reuters — Livestock futures traders continued to hunt for cover on their short positions Thursday, resulting in Chicago Mercantile Exchange cattle futures climbing a second day after prices slid to contract lows earlier this week.
The Chicago Mercantile Exchange saw live cattle and feeder cattle futures on Wednesday bounce back strongly from contract lows, with prices hitting their daily limits as traders snapped up bargains.
On Thursday, cattle futures opened higher, particularly feeder cattle futures, as healthy profit margins for beef packers helped bolstered futures prices throughout the day.
The upward trend continued throughout the day. Spot December live cattle closed the day up 1.825 cents, at 133.15 cents/lb., while February ended the day up 1.9, at 135.225 cents (all figures US$).
CME feeder cattle futures also inched upward, with spot November closed at 175.375 cents/lb., up 0.525 cents, and January was up 0.825 cents, to 166.9 cents.
Still, traders and cattle buyers alike say there is a significant disconnect brewing between the futures and the cash cattle markets.
Traders were divided about whether cash cattle trades will be higher on Friday in the Texas, Oklahoma, Kansas and Nebraska markets. And so far, beef packers haven’t been bidding up cattle in the U.S. Plains cash markets, and have seen a surplus of supplies coming to their plants, say industry analysts.
Ranchers and feedlots, trying to eke out a profit, are taking advantage of cheap corn prices to keep their animals on feed longer, which has boosted cattle weights.
As a result, a wave of increasingly heavier cattle is moving to the packers all at once, said Jessica Sampson, an agricultural economist with the Livestock Marketing Information Center.
“The feedlots are losing hundreds of dollars per head right now,” Sampson said. “Feeder cattle prices were down $4-$6/cwt in Oklahoma City… Essentially, they’ve been buying feeder cattle higher than they can sell them” to the packers.
Meanwhile, CME lean hog futures on Thursday also saw a continued turnaround as traders bet that contract lows, as well as six-year lows on a continuous chart, had hit a short-term bottom earlier this week.
December lean hogs traded choppy on Thursday, closing the day down 0.075 cents at 56.1 cents/lb., while February lean hogs were up 1.175 cents at 58.25 cents.
— P.J. Huffstutter reports on agriculture and ag commodity markets for Reuters from Chicago. Additional reporting for Reuters by Michael Hirtzer in Chicago.