U.S. live cattle futures were mixed on Friday with the October contract up on better-than-expected beef demand, posting the biggest weekly percentage increase in 15 months, said traders and analysts.
They said investors also bought October futures and sold December, playing the spread between the two contracts on the view that tight supplies could force packers to spend more for cattle.
Live cattle at the Chicago Mercantile Exchange (CME) finished up 5.6 per cent for the week — its biggest weekly increase for a week since June 19, 2011.
On Friday, October live cattle closed up 0.425 cent to 126.475 cents. December ended down 0.025 cents to 129.175 cents (all figures US$).
There were no reported cash trades with bids in the southern Plains at $122 per hundredweight (cwt) versus $126 asking prices, said feedlot sources.
Before slipping 83 cents/cwt on Friday, to $190.73, government data showed wholesale beef prices climbed three straight days as grocers stocked up for post-Labour Day features.
And the weaker dollar made U.S. beef more attractive to foreign buyers, an analyst said.
The U.S. Department of Agriculture put beef export net sales at 18,200 tonnes, mostly to Vietnam. It was up 17 per cent from the previous week and up five per cent above the prior four-week average.
"I am impressed that cattle prices are holding up so well. I would have figured the beef to be pushed lower by the fall in pork," said livestock futures trader Dan Norcini.
CME feeder cattle closed weak weighed by periodic corn price firmness, raising feed input costs for cattle feedlots.
Feeder cattle futures capped the week with modest losses for the first time in seven weeks.
September ended 0.325 cent lower at 144.300 cents. October closed down 0.125 cent to 146.125 cents.
Hogs down, not out
CME hogs closed lower but near session highs as short-covering lifted futures from initial fresh 20-month lows pressured by continued burdensome hog numbers, said traders and analysts.
Hog futures finished down 3.4 per cent for the week.
October lean hogs closed 0.4 cent lower at 71.35 cents and earlier sank to a new contract low of 70.375 cents. December ended 0.4 cent lower at 70.5 cents.
Producers flooded the market with hogs as the worst drought in more than 50 years pushed feed costs for livestock to all-time highs.
More hogs came to market after the break from hot weather in July caused animals to gain weight quicker, dumping more fresh product into the retail sector.
Also, Monday’s holiday downtime caused animals to back up on farms, prompting packers to ratchet up Saturday’s slaughter supplied with hogs at lower prices which improved their margins.
The government put the weekend slaughter at 336,000 head, which is just shy of the last largest Saturday kill of 340,000 head on Jan. 7.
HedgersEdge.com pegged Friday’s average pork packer margin at positive $17.30 per head, the highest since $18.15 on Sept. 8, 2011.
"There is a definite seasonality that coincides with the fall increase in hog supplies. This year is accelerating with the high grain prices encouraging liquidation, and this excess is driving cash prices even lower," said HedgersEdge.com analyst Bob Wilson.
— Theopolis Waters writes from Chicago for Reuters.