Chicago Mercantile Exchange live cattle futures, on a lead-month chart basis, on Friday ended higher for the sixth straight day amid persistent supply worries, traders and analysts said.
Years of drought in parts of the United States sent corn and hay costs to all-time highs last summer. The costly feed caused ranchers to downsize their herds, which now stand at the smallest since the early 1950s.
Falling temperatures in the U.S. Plains slowed cattle weight gain, exacerbating an already tight supply situation and leading to record-high prices for slaughter-ready cattle.
This week, the bulk of cash cattle in the U.S. Plains fetched $137 per hundredweight (cwt), surpassing last week’s $133 to $136 record, feedlot sources said (all figures US$).
“We’ve been talking for some time about how tight cattle supplies are going to get and here we are,” said John Nalivka, president of Sterling Marketing Inc.
He expects fewer cattle through 2014 as ranchers hold back heifers to rebuild their herds.
Christmas and New Year’s holiday plant closures, and lighter cattle weights, sparked competition among retailers for fresh beef.
Friday morning’s wholesale price for choice beef jumped $1.72/cwt from Thursday to $202.27, and select climbed $1.32 to $197.37, according to the U.S. Department of Agriculture.
“Packers were forced to pay up for cattle at the detriment of their margins. I would not be surprised if they reduced plant hours next week,” a trader said.
Beef packer margins for Friday were estimated at a negative $95.10 per head, compared with a negative $86.60 per head on Thursday and negative $73.50, a week ago, as calculated by HedgersEdge.com.
February live cattle ended 0.675 cents per pound higher at 136.3 cents, and April finished at 136.575 cents, up 0.775 cent.
CME feeder cattle futures ended higher with help from the higher live cattle market.
Feeder cattle for January closed at 167.625 cents/lb., up 0.625 cent, and March finished at 168.1 cents, 1.1 cents higher.
Hog futures sag with cash
CME hogs slid on profit taking amid lower cash prices as packers padded inventories for Saturday’s slaughter and production early next week, traders said.
The afternoon’s average price of hogs in the closely watched Iowa/Minnesota market dropped 81 cents/cwt from Thursday to $78, according to USDA.
USDA estimated Saturday’s hog slaughter at 351,000 head, compared with 363,000 last weekend and 174,000 the week before.
Packers are expected to actively process hogs on Saturday to make up for plants that were closed during Wednesday’s holiday.
Sufficient numbers of hogs at heavier weights dragged down the pork cutout price, a trader said. There is concern that meat demand could suffer if foul weather shut in consumers on the densely-populated East Coast, he added.
The afternoon’s wholesale pork price, or cutout, fell $1.21/cwt from Thursday to $82.79, according to USDA.
February hogs closed 0.4 cents/lb. lower at 86.675 cents, and April ended at 91.575 cents, down 0.225 cents.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.