Chicago | Reuters — Chicago Mercantile Exchange live cattle futures posted strong gains on Tuesday, reversing Monday’s selloff, fueled by short-covering and wholesale beef price rebound, said traders.
Technical buying ensued after investors bought the February contract and simultaneously sold deferred months in a trading strategy known as bull spreads.
February live cattle closed 1.45 cents/lb. higher at 117.375 cents, and above the 40-day moving average of 117.31 cents (all figures US$). April ended 1.475 cents higher at 114 cents.
The morning’s choice wholesale beef price, or cutout, was up 20 cents/cwt to $188.46 from Monday. Select cuts were $1.38 higher at $187.96, the U.S. Department of Agriculture said.
Market bulls are betting that futures’ and the beef cutout price turnaround will convince packers to pay steady prices for cattle this week, despite their negative margins and more animals for sale than last week.
Tuesday’s average beef packer margins were at a negative $79 per head, down from negative $57.50 a week ago, as calculated by HedgersEdge.com.
Last week, slaughter-ready, or cash, cattle in the U.S. Plains traded at $119 to $120.50.
Wednesday morning’s Fed Cattle Exchange sale of around 4,800 animals may act as a barometer for subsequent cash prices in the Plains.
Fund buying, live cattle futures advances and strong cash feeder cattle prices pulled up CME feeder cattle contracts. March feeders closed 2.175 cents/lb. higher at 124 cents.
Higher hog futures close
CME hogs settled higher led by firmer cash and wholesale pork prices, said traders.
They said deferred hog contracts topped technical resistance levels, which triggered buy stops and fund buying.
February hogs, which expired at noon CT, ended up 0.425 cent/lb. to 75.175 cents. Most actively-traded April closed 1.6 cents higher at 71.3 cents, and above the 10-day moving average of 70.69 cents.
Tuesday morning’s cash hog price in Iowa/Minnesota averaged $71.96/cwt, up 37 cents from Monday, USDA said.
U.S. government data on Tuesday morning showed the average wholesale pork price, or cutout, $1.45 per cwt higher at $86.59 from Monday, mostly led by $3.55 higher pork bellies.
Packer margins remain strong and they are still moving product in the face of record-high production, said Hehmeyer Trading + Investments senior hog futures trader Tom Cawthorne.
He expects strong pork belly prices for at least another week or so due to robust bacon demand.
— Theopolis Waters reports on livestock markets for Reuters from Chicago.