U.S. live cattle futures rose to a six-month high for a second straight day on Wednesday fueled by cash cattle price optimism and rising wholesale beef values, analysts and traders said.
Live cattle at the Chicago Mercantile Exchange (CME) garnered additional support from fund buying, traders said.
December futures led advances as funds in CME’s live cattle and hog markets conducted the Goldman roll.
Wednesday was the third of five days for the roll with funds that follow the Standard + Poor’s Goldman Sachs Commodity Index rolling some of their October long positions into deferred months.
October live cattle closed 0.6 cent higher to 127.7 cents and hit a new contract high of 127.950 cents in after-hours trading. December ended up 0.725 cent to 130.7 cents (all figures US$).
"Funds continued to buy on Wednesday after breaking through long-standing chart resistance on Tuesday as fundamentals strengthened," a trader said.
Recent futures advances, steadily gaining retail beef values and tight cattle supplies stiffened the resolve of feedlots to sell their animals at higher prices.
Cash bids in the southern Plains were extremely spotty at $122 per hundredweight (cwt) against asking prices of $128/cwt or more, a feedlot manager said. Cash cattle last week traded mostly between $124 and $125/cwt.
Wednesday morning, the U.S. Department of Agriculture estimated the wholesale choice beef price at $191.69/cwt, up 16 cents from Tuesday and select cuts rose 61 cents to $179.81.
Cattle futures traders had a muted response to USDA monthly export data that showed beef in July at 231.2 million lbs., up 10.4 per cent from June, but down 14.3 per cent from July 2011.
Feeder cattle at the CME finished higher, pulled up by live cattle market gains and lower corn prices after USDA’s crop report exceeded analysts’ expectations — thus lowering feed input costs.
Spot September ended up 0.3 cent at 144.95 cents, with its pending expiration on Sept. 27 limiting advances.
Most-actively traded October closed 1.025 cents higher at 147.375 cents.
CME hogs rallied on speculative buying tied to sentiment that cash hog prices may be close to bottoming out, said analysts and traders.
Late-session rolling by funds took some of the steam out of October and pushed up December.
October lean hogs closed up 0.7 cent at 73.425 cents. December ended 0.925 cent higher at 72.35 cents.
"Farmers can’t keep pushing hogs to market at this torrid pace without it creating a shortage in numbers at some point. It’s all about timing," a trader said.
Still, hog prices at the most-watched Iowa/Minnesota market extended their losing streak to 12, falling 68 cents to $63.33.
The market is awash with supplies as producers rush their animals to market to avoid feeding them high-priced feed after the worst drought in more than 50 years.
And hogs are coming to market ahead of schedule and heavier after a break from hot weather in July allowed them to grow faster.
The government’s weekly average weight data showed hogs in the Iowa/southern Minnesota market last week at 269.6 lbs., up 1.4 lbs. from the week before and 2.4 lbs. more than during the same period last year.
So far this week, the industry processed 1.307 million hogs, 29,000 more than during the same period a year ago.
Meanwhile, USDA put July pork exports at 397.9 million lbs., down 1.2 per cent from June, but up three per cent from July a year ago.
— Theopolis Waters writes for Reuters from Chicago.