Chicago / Reuters – Chicago Mercantile Exchange live cattle futures sagged Wednesday on profit-taking and fund selling, but strong wholesale beef values helped pull prices off morning lows, traders said.
October closed down 0.200 cent per lb at 169.000 cents, and December was 1.025 cents lower at 166.750 cents.
The morning’s choice wholesale beef price, or cutout, climbed $2.49 per hundredweight (cwt) from Tuesday to $254.05. Select rose 96 cents to $240.06, the U.S. Department of Agriculture said.
Deeply red margins forced packers to curb slaughters, which reduced the flow of beef to grocers.
From Monday to Wednesday, packers processed 329,000 cattle, 12,000 less than last week, according to USDA estimates.
Despite futures’ setback, investors expect market-ready or cash cattle to match or trade better than last week’s record-high $170 per cwt price.
Regardless of poor margins and futures’ direction, some processors need animals to accommodate meat purchases made two to three weeks in advance, another trader said.
A potential USDA Wednesday afternoon beef cutout price increase and short-covering might land some futures contracts in positive territory on Thursday, traders and analysts said.
CME October feeder cattle futures tracked the exchange’s feeder cattle index for Oct. 28 at 238.83 cents.
Remaining feeder cattle months felt pressure from live cattle market selling and sharply higher corn prices.
October, which will expire on Thursday, closed up 0.575 cent per lb at 238.850 cents per lb. November, the soon-to-be lead month, ended down 0.600 cent per lb at 233.050 cents, and January 1.100 cents lower at 227.950 cents.
Hogs turn lower
CME lean hogs closed lower in anticipation of weaker prices for slaughter-ready or cash hogs as supplies grow seasonally, traders said.
December finished 1.600 cents per lb lower at 88.600 cents, and February was down 1.250 cents at 88.050 cents.
Wednesday morning’s average hog price in the eastern Midwest fell $1.73 per cwt from Tuesday to $84.61, USDA said.
The U.S. government estimated Monday through Wednesday’s total combined kill at 1.286 million head, 7,000 more than last week.
Speculators at times bought nearby contracts on the way down with the view that the nearly two-week slide in cash hog prices may end soon.
“I’m hearing some packers might be looking for hogs for early next week, and expensive beef might force people to turn to pork,” a trader said.
Separate USDA data showed the morning’s wholesale pork price was up $1.10 per cwt from Tuesday to $98.82, supported by $6.56 per cwt higher loin costs.
Investors sold nearby contracts and bought deep-deferred months in the belief that the rise in corn prices could discourage producers from expanding their herds.
– Theopolis Waters reports on livestock futures markets for Reuters from Chicago.