Chicago Mercantile Exchange’s feeder cattle futures climbed to a two-month high on Thursday as corn prices slumped amid ethanol mandate worries, traders and analysts said.
January feeder cattle ended 1.4 cents per pound higher at 167.075 cents, and March closed at 166.55 cents, up 1.05 cents (all figures US$).
Chicago Board of Trade corn for March delivery settled down five cents at $4.34-1/4 a bushel on news that U.S. senators have introduced a measure to eliminate the corn ethanol mandate.
More-affordable corn could help ease input costs for feedlots, allowing them buy young cattle.
“Obviously the corn broke and that didn’t hurt anything,” A+A Trading broker Jim Clarkson said.
Even with the decline in gasoline and crude oil prices, ethanol production is profitable given $4 per bushel corn, he said.
“They can do whatever they want with the subsidy, if they’re making money they’re going to make ethanol,” Clarkson said.
CME feeder cattle also drew more support from the jump in feeder cattle prices in local markets, he said.
Feeders help live cattle
CME feeder cattle advances spilled into the exchange’s neighbouring live cattle market, traders said.
If the feeder cattle market had not moved up as much as it did, live cattle futures would have been lower, Clarkson said.
December live cattle finished 0.35 cent/lb. higher at 132.25 cents and February closed up 0.3 cent at 133.1 cents.
The December contract led advances as traders bought that contract and sold deferred months in anticipation steady cash prices this week.
Cash cattle bids in Texas and Kansas were at $129 per hundredweight (cwt) against asking prices of $133 and higher, said feedlots sources. Last week, cash cattle in both states fetched $132, with sales of $131 to $132 in Nebraska.
Packers may limit cash spending given their negative margins and tepid wholesale beef demand.
Beef packer margins for Thursday were at a negative $42.10 per head, compared with a negative $43.35 on Wednesday and negative $27.95 a week ago, according to HedgersEdge.com.
Thursday afternoon’s wholesale choice beef price dropped $2.16 from Wednesday to $200.45/cwt, while select cuts fell 48 cents to $186.62, based on U.S. Department of Agriculture data.
Cash aids hog futures
Higher cash prices pushed up CME hog futures, traders said.
December hogs, which will expire on Dec. 17, ended 0.4 cent/lb. higher at 81.325 cents. February hogs closed at 88 cents, up 0.225 cent.
USDA data on Thursday afternoon quoted the closely-watched Iowa/Minnesota hog market at $78.72/cwt, 46 cents higher than on Wednesday.
Packers are buying hogs for early next week’s production after padding inventories heading into this weekend, Midwest hog brokers said.
Despite cold weather in parts of the Midwest, which tends to slow animal weight gains, hogs are coming to market at record-high weights which is pressuring the pork cutout.
Less-costly feed and temperature-controlled swine buildings are allowing hogs to add weight quickly, a trader said.
Thursday morning’s wholesale pork price, or cutout, tumbled $2.27/cwt to $88.13, USDA said.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.