Chicago | Reuters — Chicago Mercantile Exchange feeder cattle futures on Tuesday hit an all-time high, supported by firm prices for young calves, or feeder cattle, traders said.
Feedlots are paying more for calves after years of drought in parts of the U.S. shrank the herd to a 63-year low.
Gains in CME’s live cattle pit lifted feeder cattle futures, traders said.
May closed 0.825 cent per pound higher at 183.475 cents, and set a new contract high of 184.75 cents in electronic trading (all figures US$). August ended up 1.45 cents at 191.25.
Live cattle up on discounts
CME live cattle closed higher, helped by their discounts to last week’s cash prices, traders said.
June closed up 0.775 cent/lb. at 138.3 cents, and August 0.675 cent higher at 137.925.
Last week, cash or market-ready cattle in Texas and Kansas moved at $146 per hundredweight (cwt), with sales of up to $150 in Nebraska.
Traders are uncomfortable with the big discounts futures have to cash, said U.S. Commodities analyst Don Roose.
Investors look for steady cash cattle prices this week given improved packer margins versus a seasonal supply increase.
Beef packer margins for Tuesday were at a positive $10.70 per head, compared with a positive $1.95 on Friday and a negative $7.60 a week ago, as calculated by industry analytics firm HedgersEdge.com
Funds in CME’s live cattle and hog markets sold, or rolled, their June long positions mainly into the August contract ahead of a similar move to the Standard + Poor’s Goldman Sachs Commodity Index “roll.”
Wednesday is the official start of the five-day S+PGSCI roll.
Hogs gain as funds buy
CME hogs closed mostly higher on fund buying and short covering that propelled futures beyond moving average levels, traders said.
Lower cash hogs and wholesale pork prices undercut the May contract.
The morning’s average hog price in the Iowa/Minnesota market tumbled $6.42 per cwt from Monday in extremely thin volume to $106.57, according to USDA.
Separate government data showed the morning’s wholesale pork price tumbled $3.73/cwt from Monday to $112.29, led by a big drop in loin and pork belly costs.
CME summer-month hogs are bearishly overpriced compared with the exchange’s hog index at 114.21, said Roose. But investors are speculating about production losses caused by the pig virus, he said.
Agribusiness research firm Rabobank on Tuesday estimated as much as a seven per cent drop in U.S. pork production in 2014 pegged to the porcine epidemic diarrhea virus.
May hogs closed 0.85 cent/lb. lower at 116.05.
June finished 0.875 cent higher at 123.225 cents, and July was up 1.325 cents to 123.3.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.