Chicago | Reuters — U.S. livestock futures gained on technical buying on Tuesday, with feeder cattle rising to a two-month high and lean hogs climbing by as much as 2.6 per cent, traders said.
Fresh news remained scant, but traders were more optimistic about higher cash prices for both cattle and hogs. Declining prices for corn cut feed costs for livestock producers, bolstering profit margins and boosting demand for feeder cattle.
“I think the (cattle) market is trying to bottom,” said independent livestock trader Tommy Beall. “Corn is cheap enough… and that’s supportive.”
Chicago Mercantile Exchange October feeder cattle firmed by 0.85 cent to settle at 152.8 cents/lb., the highest since July 20 (all figures US$). More actively traded CME October live cattle were up 0.400 cent at 107.975 cents.
Live cattle futures continued to rise from multimonth lows notched on Aug. 31 amid ideas that beef packers who were earning big profit margins would pass on some of those gains to the feedlots that sell them cattle.
Average beef packer profit margins were estimated at $148.45 per head of cattle, according to HedgersEdge LLC. That is down from $151.30 per head a week ago but up from $67.30 per head a month ago.
Analysts polled by Reuters expected the U.S. Department of Agriculture in a monthly report on Friday to show the number of cattle placed in feedlots last month down 2.9 percent from the same month in 2016.
Record daily hog slaughter
USDA estimated the U.S. daily hog slaughter at 455,000 hogs, matching the record-large kill from Thursday.
Two new pork packing plants in Iowa and Michigan were increasing their slaughter rates after beginning production earlier this month, traders said.
The slaughterhouses were needed to prevent an oversupply of U.S. hogs, with hog producers earlier this year increasing production in anticipation of a broader demand base.
CME lean hog futures were higher, lifted in part by bear-spreading as the December hog futures contract surged 1.675 cents to 59.725 cents per pound while front-month October futures gained only 0.125 cent to 60.125 cents.
Tim Hughes, leader of the hog margin team at Commodity and Ingredient Hedging, said some traders were buying December futures on bets that the new packing plants would be more aggressive hog buyers later this year.
“There’s more optimism that at some point in the near future you might have more competition for these hogs as the plants get ramped up,” Hughes said.
— Michael Hirtzer reports on commodity markets for Reuters from Chicago.