Chicago | Reuters — The Chicago Mercantile Exchange saw live cattle and feeder cattle futures bounce back strongly from contract lows on Wednesday, with prices hitting their daily limits as traders snapped up bargains and investors covering their short positions.
Meanwhile, CME lean hog futures also saw a turnaround as traders bet that contract lows, as well as six-year lows on a continuous chart, had hit bottom, at least for the short term.
December lean hogs closed up 2.625 cents, at 56.175 cents/lb., while February lean hogs was up 1.925 cents, at 57.075 cents (all figures US$).
Still, some trade analysts cautioned that hog futures could remain somewhat constrained, given seasonal pricing trends and uncertainty over how hungry consumers will be for holiday hams and other pork cuts.
Ample stocks also could continue to weigh down hog futures in the coming days, analysts said. Weekly U.S. Department of Agriculture data showed the average hog weights in Iowa and southern Minnesota were up more than 1.6 lbs.
Cattle futures started the day out with traders focused on early reports of snowfall in parts of Colorado and the eastern Great Plains, which fuelled worries about the impact on feed lots and processors. But as weather forecasts reported scant snow, the focus shifted to traders hungry for profits.
Live cattle futures contracts had declined by their expanded daily price limit of 4.5 cents on Tuesday, following a limit-down move on Monday.
“What we’re seeing today is profit-taking, after being a long, long way down,” said Rich Nelson, chief strategist for Illinois-based brokerage Allendale.
Spot December live cattle closed the day at the daily trading limit of up three cents, at 131.325 cents/lb., as was February, which also closed up three cents at 133.325 cents.
CME feeder cattle futures also jumped, with spot November closed at 174.85 cents/lb., up 3.3 cents, and January was up the daily limit of 4.5 cents, to 166.075 cents.
Given Wednesday’s cattle futures jump, Nelson said, “we could see things open higher tomorrow.”
Some analysts are predicting that beef demand will pick up between mid-November and early December, based on the U.S. October unemployment rate, which recently hit a 7-1/2-year low.
But beef packers aren’t yet bidding up cattle in the U.S. Plains cash markets, said trade analysts: Wednesday’s offers were said to be as low as $132/cwt, and could be seen at rates lower than the $134 trade last week in Texas and Kansas.
— P.J. Huffstutter reports on agriculture and ag markets for Reuters from Chicago. Additional reporting for Reuters by Michael Hirtzer in Chicago.