U.S. cattle futures spring back as grilling season nears

Chicago Mercantile Exchange (CME) live cattle futures were higher on Monday lifted by short-covering in anticipation warmer spring weather will increase demand for outdoor grilling, traders and analysts said.

Beef prices have advanced ahead of warmer weather with help from better economic news and the stock market advancing after its steep drop on Friday, said U.S. Commodities analyst Jason Roose.

Live cattle futures’ discount to last week’s cash cattle prices attracted speculative buyers to futures, traders said.

CME livestock traders largely overlooked a Cleveland Clinic study that linked a bacteria found in red meat and energy drinks to heart disease.

“Anytime you get bad press for anything, it’s not good. But, the research didn’t show anything major about beef that we didn’t already know,” a trader said.

Still, uncertainty about near-term cash cattle prices prompted selling into market rallies.

CME live cattle spot April futures and most-actively traded June eased from highs after unsuccessfully trying to break through their respective 20-day resistance levels of 127.08 and 122.6 cents per pound (all figures US$).

Spot April closed up 0.25 cent at 126.275 cents/lb. Most-actively traded June ended up 0.525 cent higher at 122.025 cents.

Investors waited for feedyards to tally the number of cash cattle available for sale this week. An unofficial count so far shows 20,000 fewer cattle which, if true, could underpin cash values, a trader said.

But poor margins and brisk beef sales, but at lower prices, may prompt packers to reduce slaughter rates and limit cash spending, he said. He expects cash-basis cattle to trade roughly steady with last week at $128 to $129/cwt.

On Monday, the U.S. Department of Agriculture reported the average wholesale choice beef price down 37 cents/cwt to $190.95; select cuts slipped 55 cents to $186.46 cents.

U.S. beef packer margins on Monday were estimated at a negative $45.30 per head versus a negative $41.90 on Friday and a negative $33.85 a week ago, according to HedgersEdge.com.

Monday is the first notice day for deliveries against CME April live cattle that will expire on April 30.

Technical support and firmer CME live cattle futures lifted feeder cattle contracts.

April feeder cattle settled up 0.175 cent/lb. to 142.75 cents. May ended 0.45 cent higher at 144.75 cents.

Hogs up on grilling ideas

Short-covering, following an uptick in wholesale pork prices that signaled retailers may be stocking up for spring grilling features, pushed up CME hog futures, analysts and traders said.

“There was good short-covering in the market on the prospect that pork demand will turn the corner soon when we get into consistently warmer weather,” said Roose.

But, fading operating margins forced packers to lower cash hog bids, limiting futures’ upside momentum. Investors also sold into rallies based on the market’s premium to CME’s lean hog index at 79.03 cents.

HedgersEdge.com estimated the U.S. pork packer margins on Monday at a negative $5.40 per head versus a negative $4 on Friday and a negative $4.55 a week ago.

Spot April hogs, which will expire on April 12, closed at 80.525 cents/lb., up 0.5 cent.

Most actively traded June gained 0.85 cent/lb. to 90.55 cents. It finished above the 20-day moving average of 90.43 cents.

The government on Monday quoted the average hog price at the most-watched Iowa/Minnesota market at $79.36 per hundredweight (cwt). It was down 99 cents from Friday, breaking an 12-session streak of advances.

Monday morning’s mandatory wholesale pork price, calculated on a plant delivered basis, was $80.62/cwt, up 26 cents from Friday, according to USDA.

— Theopolis Waters writes for Reuters from Chicago.

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