Chicago | Reuters — Chicago Mercantile Exchange feeder cattle surged Thursday on short covering in volatile action after the exchange expanded futures trading limits, following three-cent-per-pound limit-down settlements five days in a row.
CME took emergency steps on Wednesday to stem the plunge in feeder cattle contracts by increasing its limit to 4.5 cents/lb. from three cents (all figures US$).
Increased limits gave longs the opportunity to get out of those positions, said a trader who cited further support from buying in the live cattle market.
January closed up 0.475 cent/lb. at 217.075 cents, and March 1.525 cents higher at 213.775 cents.
Live cattle rally
CME live cattle ended up sharply, supported by short covering and bargain hunting after recent losses, traders said.
Live cattle investors breathed a sign of relief after the exchange expanded feeder cattle limits, a trader said.
December closed 2.275 cents/lb. higher at 158.7 cents, and February 2.7 cents higher at 158.525 cents.
U.S. equities climbed more than two per cent, which further supported the CME livestock market because of implications for consumer confidence.
CME live cattle made headway in spite of disappointing fundamentals.
So far this week, a few market-ready or cattle in Kansas and Texas moved at $156 to $157 per hundredweight (cwt), down from $162 to $164 in the U.S. Plains a week ago.
Extremely poor margins and lackluster wholesale beef demand prompted processors to curtail slaughter rates, reducing their need for supplies.
Thursday afternoon’s choice wholesale beef price slipped 46 cents/cwt from Wednesday to $241.95. Select dropped 81 cents to $230.32, according to U.S. Department of Agriculture data.
Some investors adjusted positions before USDA’s monthly Cattle-On-Feed report on Friday.
Hogs close higher
CME hogs settled higher on short covering and spillover live cattle support, traders said.
February closed up 1.4 cents/lb. at 81.875 cents, and April 1.325 cents at 83.225 cents.
Futures’ discount to the exchange’s hog index at 85.95 cents attracted buyers despite lower-trending prices for slaughter-ready or cash hogs.
USDA showed Thursday afternoon’s average price of hogs in the Iowa/Minnesota market at $76.05/cwt, $1.58 lower than on Wednesday.
Packers have enough hogs as they prepare to close plants during the year-end holidays, an analyst said.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.