U.S. livestock: Profit-taking undercuts CME live cattle futures

(Photo courtesy Canada Beef Inc.)

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures sagged for a second straight session on Tuesday, after participants took profits in the year’s final week of trading, traders said.

Spot December and February each closed 0.65 cent/lb. lower, at 130.2 and 135.5 cents respectively (all figures US$).

Traders adjusted positions while awaiting the sale of market-ready, or cash, cattle as early as Wednesday.

Last week, cash cattle in the U.S. Plains sold for $122-$124/cwt.

Recent wholesale beef price advances, and the first full week of production after the Christmas and New Year’s holidays, are supportive cash price influences.

Bearish cash price factors include negative packer margins and potential grocer pushback against rising beef wholesale beef costs.

Tuesday morning’s wholesale choice beef price jumped $4.70/cwt from Monday, to $205.79. Select cuts climbed $3.18, to $196.39, based on U.S. Department of Agriculture data.

Traders are monitoring cleanup in the Texas/Oklahoma panhandle after a recent winter storm disrupted cattle production there.

On Tuesday, packers processed 108,000 head of cattle, 8,000 less than last week prior to the Christmas holiday, based on USDA estimates.

CME live cattle futures selling pressured the exchange’s feeder cattle contracts. January feeders ended down 0.175 cent at 162.475.

Hog futures steady-lower

In a trading strategy known as bull spreading, investors bought the CME lean hog February contract and simultaneously sold deferred months.

“People spread into February, partly because it is the cheapest thing (contract) on the board,” a trader said.

Spot February settled up 0.025 cent/lb. at 59.15 cents, April fell 0.175 cent, to 65.875 cents, and May slipped 0.425 cent, to 73.975.

The morning’s wholesale pork uptick supported futures, but lower cash prices limited market gains, traders and analysts said.

Cash hogs in the Iowa/Minnesota market on Tuesday morning were at $48.90/cwt, down 42 cents from Monday, USDA said.

The morning’s wholesale pork price gained 26 cents/cwt to $70.76 from Monday, USDA said.

Processors have enough inventory for this week, while grocers bought pork sparingly due to the holiday-shortened work week and wintry weather that reduced available supplies.

Packers on Tuesday processed an USDA-estimated 430,000 hogs, 10,000 fewer than last week. The government revised Monday’s kill down to 419,000 from 440,000 head.

Theopolis Waters reports on livestock markets for Reuters from Chicago.

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