U.S. livestock: CME live cattle spike on cash price hopes

(Photo courtesy Canada Beef Inc.)

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures peaked at a four-month high on Friday, fueled by short-covering in anticipation of strong market-ready, or cash, cattle prices later on Friday, traders said.

April ended 1.5 cents/lb. higher at 139.8, and June closed up 0.925 cent/lb. to 128.55 (all figures US$).

Cash cattle bids in Texas and Kansas held at $136/cwt against as much as $142 asking prices, said feedlot sources.

The morning’s wholesale choice beef price, or cutout, sagged $1.12/cwt from Thursday, to $224.12. Select cuts rose $1.40, to $215.25, the U.S. Department of Agriculture said.

Future’s recent rally, much-improved packer margins and relatively solid wholesale beef demand are bullish cash market factors.

“Grilling season possibly arriving early may have kicked up the beef cutout at a time when demand typically weakens this time of year,” said U.S. Commodities analyst Don Roose.

Friday’s average beef packer margin was a negative $3.45 per head, up from a negative $15.55 on Thursday, as calculated by HedgersEdge.com.

The prospect of better cash prices prompted investors to buy April futures and sell deferred months. The move delayed the “roll” by funds out of the April contract.

Friday was the last official day that funds in CME’s livestock markets that track the Standard + Poor’s Goldman Sachs Commodity Index (S+PGSCI) could sell, or “roll,” April long positions mainly into June.

Live cattle future’s upswing also sent CME feeder cattle to its highest level in two months. March closed 0.85 cent/lb. higher at 162.4 cents.

Mostly weak hog futures close

CME lean hog futures’ premiums to the exchange’s hog index for March 9 at 66.56 pressured contracts, said traders.

“April is carrying a bigger premium to the index than maybe it should. June is about right considering tighter hog numbers at that time,” said Roose.

Cash price uncertainty following the setback in wholesale pork values also weighed on April futures.

The morning wholesale pork price on Friday fell $1.52/cwt from Thursday to $75.13, mainly hit by the $5.51 plunge in pork belly costs, based on government data.

Fund rolling further pressured the nearby CME lean hog contracts but propped up deferred months.

April closed 0.35 cent/lb. to 71.825 cents, and May ended 0.1 cent to 79.25 cents. June finished 0.175 cent higher at 83.075 and July ended up 0.15 cent to 82.2.

Theopolis Waters reports on livestock markets for Reuters from Chicago.

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