Chicago | Reuters — Chicago Mercantile Exchange live cattle closed higher on Wednesday, lifted by initial prices for market-ready, or cash, cattle and short-covering after recent market losses, traders said.
Thinly traded June futures, which will expire on Friday, led advances. Some investors bought that contract and simultaneously sold deferred months in a trading strategy known as bull spreads.
“Wednesday’s $106/cwt cash sales makes the August contract look cheaper after June goes off the board,” a trader said (all figures US$).
On Wednesday packers paid $106 per cwt for cash cattle in the U.S. Plains. Last week cattle brought $108-$110.
Processors need fewer cattle for the U.S. Fourth of July holiday-shortened work week, traders and analysts said. They also cited the near seasonal peak in wholesale beef demand and increased supplies ahead.
“Right now the packer is in control of this market because of the numbers. Until that ends, then it’s hard to buy (futures),” said A+A Trading broker Jim Clarkson.
Still, other feedlots are holding out for more money for remaining cattle, citing historically high packer margins.
A packing plant in the Plains was fully operational on Wednesday after being offline Monday and Tuesday due to equipment repairs, traders and analysts said.
June live cattle closed 1.1 cents/lb. higher at 107.025 cents. Most actively traded August ended up 0.3 cent at 102.725 cents.
CME feeder cattle ended weaker, reflecting lower cash feeder cattle prices, said traders.
Feeder cattle futures are effectively too high to hedge relative to deferred live cattle contracts, Clarkson said, adding, “It doesn’t pencil out.”
August closed 0.325 cent/lb. lower at 145.775 cents.
Hog futures move higher
CME lean hogs rose for a second straight session, led by short-covering and future’s lower price, or discount, to the exchange’s hog index for June 25 at 85.63 cents, said traders.
Downward-trending cash hog prices and simmering U.S. trade issues capped deferred trading month advances, they said.
Packers paid less for hogs during the past six sessions to recoup lost margins and as plants prepare to shutdown for the Fourth of July holiday, said traders and analysts.
Market participants adjusted positions before the U.S. Department of Agriculture’s quarterly hog report on Thursday.
July hogs ended 1.1 cents/lb. higher at 80.225 cents. August closed up 0.3 cent at 75.05 cents.
— Reporting for Reuters by Theopolis Waters in Chicago.