U.S. live cattle futures surge to record high

Chicago live cattle rose on Thursday amid expectations of tighter supplies in the months ahead, driving the lead contract to an all-time high for a second day in a row.

Chicago Mercantile Exchange (CME) February live cattle hit a record of 134 cents on the continuous chart, surpassing Wednesday’s 133.15-cent mark (all figures US$).

The record-setting feat was helped by the February replacing the December contract as the spot month on Dec. 31 after having built up a significant premium.

Futures were also boosted by an increase in wholesale beef values, prompting those who had been bearish on the market to cover their short positions.

The price for wholesale choice beef Thursday morning was $195.38 per hundredweight, $1.44 higher than on Wednesday, according to the U.S. Department of Agriculture.

And, February and April futures broke through their respective 10-day moving average resistance levels of 133.35 and 137.07 cents, touching off fund buying, traders said.

Spot February closed up 1.475 cent per pound, or 1.11 per cent, at 133.85 cents. April ended at 137.325 cents, up 1.15 cents, or 0.84 per cent.

CME live cattle advances widened the premium between prices for futures and cash markets, which are expected to trade steady to higher against last week’s $127/cwt.

"Cash is going to make its way up in the cattle market, it’s just a matter of time," said R.J. O’Brien floor manager James Brooks.

Cash bids in Kansas surfaced at $125, a feedlot manager said. There were no bids reported by traders elsewhere in the Plains, where animals are priced at $130 or more.

Packers are buying cattle for next week, the first full week of slaughter after plants shut down for the Christmas and New Year’s holidays. But packers may try to stabilize their poor margins by periodically reducing their pace of slaughter.

HedgersEdge.com put the average beef packer margin for Thursday at a negative $55.15 per head, compared with a negative $57.30 on Wednesday and a negative $57.55 on Dec. 27.

CME feeder cattle moved inline with the higher live cattle market, technical buying and weaker corn prices.

Spot January ended 1.15 cents/lb. higher, or up 0.76 per cent, at 152.35 cents. Most actively traded March was one cent higher, or up 0.65 per cent, at 154.9 cents.

Hogs jump on cash outlook

Hog futures rose on anticipation that packers would increase bids in the cash markets n ext week amid tight supplies, traders and analysts said.

Short-covering and fund buying contributed to hog market gains, they said.

February settled up 0.225 cent/lb., or 0.26 per cent, at 86.4 cents. April ended at 90.175 cents, up 0.925 cents, or 1.04 per cent.

The tight hog supplies were due to producers rushing their animals to market before the year-end holidays.

Still, other traders contend hogs would be readily available next week as frigid temperatures in the western and central Midwest moderate, causing hogs to gain weight.

The average pork packer margin for Thursday was a negative $7.05 per head, compared with a $3.65 on Wednesday and positive 90 cents on Dec. 27, according to HedgersEdge.com.

— Theopolis Waters writes for Reuters from Chicago.

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