U.S. livestock: Live cattle futures gain on strong cash trade

CME lean hogs down off six-week high

CME February 2021 live cattle with Bollinger (20,2) bands. (Barchart)

Chicago | Reuetrs — Live cattle futures gained on Wednesday, supported by a firming cash cattle market as traders eye the consumer demand picture.

Chicago Mercantile Exchange February live cattle futures added 0.75 cent to settle at 113.925 cents/lb. (all figures US$).

Tighter cattle supplies could begin pushing cash markets higher, whittling away at historically high packer margins, said Dennis Smith, broker at Archer Financial Services.

“If placements have peaked,” he said, packers’ margins “will begin to narrow, and the leverage will swing a little bit to the feedlot.”

Daily cattle slaughter remains strong, with 120,000 head processed Wednesday, on track for a bigger week of beef slaughter than a year earlier, despite social distancing measures implemented in slaughterhouses due to COVID-19.

Meanwhile, boxed beef prices stepped back from recent highs, with choice cuts trimming $2.51, to $240.89 per hundredweight (cwt), and select cuts dropping 13 cents, to $222.95/cwt.

“You had retailers loading up a little bit here, in anticipation of more shutdowns like we saw this spring,” said Matt Wiegand, risk management consultant at FuturesOne. “Maybe they’re going to be backing off a little bit until they can move some inventory.”

CME January feeder cattle ended 0.15 cent higher at 141.8 cents/lb.

Market-ready cattle traded $1 higher in the southern U.S. Plains cash market, reaching $112/cwt, according to the U.S. Department of Agriculture.

“Cash steer prices are grossly undervalued, compared to the wholesale beef complex,” said Smith.

In hogs, CME’s benchmark February lean hog futures contract settled 0.875 cent lower at 67.875 cents/lb., retreating after reaching a nearly six-week high Tuesday on support from a steady cash trade, said Wiegand.

“Cash price, hogs are straight sideways, and keeping a good clip there,” he said.

Daily hog slaughter remains strong at 497,000 head, but the week-to-date pace looks to fall short versus last week and a year ago.

— Christopher Walljasper reports on agriculture and ag commodities for Reuters from Chicago.

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