Chicago Mercantile Exchange live cattle futures on Monday landed in positive territory for a third straight session, fuelled by sharply higher wholesale beef prices, traders said.
Monday morning’s wholesale price for choice beef rose $2.33 per hundredweight (cwt) from Friday to $199.32, and select surged $3.30 to $194.60, according to the U.S. Department of Agriculture (all figures US$).
Plant closures during the Thanksgiving, Christmas and New Year’s holidays reduced the amount of beef available to end users, thereby driving up wholesale prices, analysts and traders said.
And, they said, some supermarkets are stocking up on beef to feature it soon after Jan. 1.
Monday’s beef price upswing followed Friday’s record-high cash cattle returns in the midst of tight supplies.
Last week, cash cattle in Texas moved at mostly $133.50 per hundredweight (cwt), feedlots sources said. They reported sales of mainly $133 in Kansas and $135 in Nebraska.
Typically, beef prices may have to move sharply higher for packers to rationalize paying record prices for cattle, EBOTTrading.com senior analyst John Kleist said.
Despite poor margins, processors paid more for cattle, knowing they will need them for the first full week of production after the holiday-shortened workweeks.
Packers are expected to cut operating hours to offset scarce supplies and cushion margins.
Beef packer margins for Monday were estimated at a negative $88.25 per head, compared with a negative $73.50 per head on Friday and negative $55.15, a week ago, as calculated by HedgersEdge.com.
USDA estimated Monday’s cattle slaughter at 130,000 head, including 10,000 head that were processed on Sunday.
Cargill Inc. likely harvested cattle on Sunday to make up for one of its plants that was temporarily sidelined by fire last week, traders and analysts said.
December live cattle, which will expire on Tuesday, finished 0.55 cent per pound higher at 134.4 cents. February settled up 0.15 cent at 135.1 cents.
CME feeder cattle drew support from live cattle futures advances and weaker corn prices.
Feeder cattle for January closed at 167.275 cents/lb., 0.275 cent higher, and March finished at 167.95 cents, up 0.15 cent.
Hog futures fall from highs
CME hogs turned lower on profit taking and cash price worries that erased initial futures gains sparked by Friday’s bullish USDA hog report, traders said.
That data showed the U.S. hog herd fell by one per cent in the latest quarter, slightly more than forecast as a deadly swine virus thwarted pork producers’ efforts to rebuild herds.
Premiums in the April and June contracts imply that traders had already anticipated a big impact from the virus, independent livestock futures trader Dan Norcini said.
USDA showed the morning’s average cash hog price in the eastern Midwest at $76.13/cwt, down 27 cents from Friday. Overall cash hogs in the Midwest sold steady to $1 lower, according to hog dealers.
Some packers are reluctant to raise cash hog bids given ample supplies and plants closed on New Year’s. Others will soon need hogs for Saturday to make up for Wednesday’s holiday downtime.
February hogs closed 0.675 cent/lb. lower at 84.975 cents, and April ended down 0.525 cent at 90.45 cents.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.
Related story:
Klassen: Feeder cattle buyers eyeing risks in new year, Dec. 30, 2013
