U.S. livestock: Retreating equities undermine CME live cattle

(Photo courtesy Canada Beef Inc.)

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures closed lower on Wednesday, pressured by falling U.S. stock futures amid the unrelenting slide in crude oil prices, traders said.

February live cattle ended 2.05 cents/lb. lower at 127.25 cents, and April closed down 1.975 cents at 128.175 (all figures US$).

Bullish CME live cattle traders were attracted to the morning’s wholesale beef price uptick and future’s discounts to last week’s prices for market-ready or cash cattle.

However, A+A Trading Inc. broker Jim Clarkson said the stock market and crude oil turmoil, along with plentiful pork and poultry, proved to be formidable obstacles for cattle market fundamentals to overcome.

“Beef prices can’t be near its all-time highs when pork and chicken are near its all-time lows,” said Clarkson.

Wednesday morning’s wholesale beef price rose 76 cents/cwt from Tuesday, to $230.69. Select cuts jumped $1.02, to $224.72, the U.S. Department of Agriculture said.

There are fewer cattle for sale than last week, but investors see packers paying less for supplies by Friday while trying to halt the recent slide in profit margins.

The average beef packer margin for Wednesday was $86 per head, down from $99.60 for Tuesday and $139.45 a week ago, as calculated by consultancy HedgersEdge.com.

Last week, cash cattle in the U.S. Plains moved at $132-$134/cwt.

Live cattle future’s slide and sharply lower cash feeder cattle prices dropped CME feeder cattle contracts. January closed at 155 cents/lb., 1.55 cents lower.

Soft hog futures settlement

Selling in CME’s live cattle futures spilled over into the exchange’s lean hog market, traders said.

Spot February finished down 0.125 cent, to 62.725 cents, and April ended 0.65 cent lower at 67.075 cents.

Traders and analysts said the morning’s firm cash and wholesale pork prices minimized futures losses.

The government reported the morning’s wholesale pork price at $74.62/cwt, $1.19 higher than on Tuesday driven by the more than $3 increase in rib costs.

On Wednesday morning, packers in Iowa/Minnesota on average paid $54.32 for hogs, up 79 cents from Tuesday.

Frigid temperatures and icy roads in parts of the Midwest delayed the delivery of pigs to packing plants in the most affected areas, said regional hog dealers.

Some retailers stocked up on pork to feature in early February, while end users bought hams in advance of the Easter holiday, traders and analysts said.

Theopolis Waters reports on livestock markets for Reuters from Chicago.

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