U.S. livestock: Cash price outlook boosts CME live cattle

Chicago | Reuters — Chicago Mercantile Exchange live cattle contracts climbed on Thursday, propelled by anticipation of firm cash prices by Friday amid improved wholesale beef demand, traders said.

The February contract, which will expire on Monday, closed up 0.9 cent/lb. to 137.875 cents (all figures US$). April ended 1.2 cents higher at 137.35 cents.

The morning’s wholesale choice beef price, or cutout, rose 98 cents/cwt from Wednesday, to $217.72. Select cuts gained 72 cents, to $214.44, the U.S. Department of Agriculture said.

“We expected the cutout to rally into Tuesday or so of next week, which might be somewhat optimistic. We have to keep in mind extreme competition from other meat proteins waiting on the other end of this thing,” said Allendale Inc. chief strategist Rich Nelson.

Beef’s seasonal turnaround, about 13,000 fewer cattle for sale and future’s recent rally imply at least $134/cwt prices for market-ready, or cash, cattle by Friday, said traders and analysts.

“Beef cutout’s strong performance worked wonders for packer margins, yet another reason for potential cash strength,” a trader said.

Thursday’s average beef packer margin was a negative $22.65 per head, up from a negative $24.35 on Wednesday and negative $39.20 a week ago, as calculated by HedgersEdge.com.

Weak corn futures and live cattle market advances lifted CME feeder cattle contracts. March closed 1.15 cents/lb. higher at 159.1.

Hog futures end weak

Profit taking and sentiments that cash hog prices may be about to top out weakened CME lean hogs, traders said.

April closed 0.35 cent/lb. lower at 71.125 cents, and May finished down 0.125 cent/lb., to 77.1.

Weather and maintenance-related issues significantly reduced Thursday’s hog slaughter, and may have backed up animals on farms that could pressure near-term cash prices, traders and analysts said.

On Thursday, packers processed 388,000 hogs, down from 437,000 a week ago, according to USDA estimates.

Analysts and Midwest hog dealers projected a roughly 100,000-head Saturday kill, including plants making up midweek downtime.

Thursday morning’s average cash hog price in Iowa/Minnesota slipped 25 cents/cwt in light volume from Wednesday to $63.96, USDA said.

Theopolis Waters reports on livestock markets for Reuters from Chicago.

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