U.S. live cattle futures wilt as cash disappoints

Chicago Mercantile Exchange (CME) live cattle futures posted modest losses on Wednesday after prices for cattle in the cash market came in higher, but fell short of traders’ expectations.

Cash cattle in the southern U.S. Plains traded at $125 per hundredweight (cwt), $3 higher than last week, feedlot sources said (all figures US$).

Some investors expected cash to trade at $126 to $127 based on February futures at around 128.000, said K+S Financials analyst Jack Salzsieder.

CME spot February live cattle closed at 128 cents per pound, 0.275 cent lower. April ended down 0.05 cent to 132.925 cents.

Fewer cattle available for sale compared with a week ago likely prompted packers to spend more for supplies than they wanted to, a trader said.

Also, plunging temperatures and blowing snow in the U.S. Plains disrupted the transportation of livestock to market, which further supported cash values, he said.

The U.S. Department of Agriculture showed the number of cattle processed on Wednesday at 119,000 head, 4,000 less than a week earlier and for the same period a year ago.

HedgersEdge.com put the average beef packer margin for Wednesday at a negative $27.50 per head, compared with a negative $23.05 on Tuesday and a negative $36 on Jan. 23.

CME live cattle traders await the government’s semi-annual cattle inventory report on Friday at 2 p.m. CST. Analysts expect the data to show the U.S. cattle herd fell for a sixth straight year as drought drove up feed costs.

"Everybody knows the (cattle) numbers are going to be down, it’s just a matter of how much," said Salzsieder.

Feeder cattle futures closed firm as spot January tracked CME’s feeder cattle index at 145.13 cents. The spot month expires on Thursday at noon CST.

Traders exited spot January and bought the March contract ahead of the spot-month expiration date.

Spot January ended up 0.025 cent/lb., to 145.825 cents. Most-actively traded March finished at 149.1, 0.275 cent higher.

Hogs await cash direction

Hog futures finished steady to weak as investors await further direction from cash hog prices, traders and analysts said.

Spot February settled unchanged at 87.1 cents/lb., drawing support from its slight discount to CME’s lean hog index at 88.42 cents.

Most-active April ended at 88.25 cents, 0.375 cents lower and June closed down 0.1 cent to 98.075 cent.

"We’re getting led around by changing weather in the Midwest that has taken cash prices down one day and up the next," a trader said.

The average hog price in the most-watched Iowa/Minnesota market Wednesday morning jumped $2.49/cwt to $86.95, after falling $1.60 Tuesday evening.

The return of wintry weather in parts of the Plains could snarl transportation, which could underpin cash hog prices for the remainder of the week.

Also, packers may be more willing to raise bids for cash hogs after their margins surfaced in the black.

The average pork packer margin for Wednesday was at a positive $1.35 per head, compared with a negative $4.80 on Tuesday and a negative $5.55 on Jan. 23.

— Theopolis Waters writes for Reuters from Chicago.

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