U.S. livestock: Solid beef demand drives CME live cattle higher

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures on Tuesday gained, supported by short-covering sparked by strong demand for beef at wholesale, traders and analysts said.

Tuesday morning’s wholesale choice beef price, or cutout, climbed $2.26 per hundredweight (cwt) from Monday to $231.32 (all figures US$). Select cuts rose $1.23 to $219.30, based on U.S. Department of Agriculture data.

The beef cutout has been mixed to higher seven days in a row as supermarkets prepare to feature product for the spring grilling season, analysts and traders said.

Intentional slaughter cutbacks by packers to offset tight supplies made less beef available to end users, giving the cutout added lift and improved packer margins.

HedgersEdge.com calculated the beef packer margins for Tuesday at an estimated negative $45.15 per head, compared with a negative $77.95 on Monday and a negative $121.80 a week ago.

Fund buying and buy stops emerged after futures broke through moving average levels. And, futures’ discount to last week’s prices for market-ready, or cash, cattle attracted buyers.

Profit-taking and uncertainty regarding this week’s cash cattle prices pulled CME live cattle from session highs.

Negative packer margins and a seasonal bump in supplies may weigh in cash cattle returns. Strong beef demand and CME live cattle’s upswing may underpin cash prices.

Last week, cash cattle in Texas and Kansas fetched $147/cwt, and at $148 in Nebraska, feedlot sources said.

USDA’s cold storage report, which will include last month’s total beef and pork inventories, will be issued at 2 p.m. CT.

April live cattle closed up 0.25 cent per pound, to 143.7 cents. June ended 0.425 cent higher at 134.975 cents, and returned below the 10-day moving average of 135.265 cents.

August finished 0.75 cent higher at 133.675 cents. It closed above the 10-day moving average of 133.295 cents and below the 20-day moving average of 133.745 cents.

CME feeder cattle maintained a portion of their early-session run up to new contract highs, fueled by technical buying and live cattle futures’ buying.

May closed 0.55 cent/lb. higher at 178.65 cents.

August ended up 0.65 cents to 182.55 cents, and spiked to a new contract high of 183.25 cents. September ended 0.875 cents higher at 182.7 cents, after spiking to a fresh contract high of 183.375 cents.

Hogs up as funds buy

CME hogs finished higher on fund buying and buy stops triggered after June and July surpassed technical resistance barriers, traders said.

May hogs closed up 0.1 cent/lb., at 125.575.

June finished up one cent at 123.35 cents — above the 40-day moving average of 122.955 cents and below the 20-day moving average of 123.904 cents.

July closed at 121.2 cents, 0.7 cent higher and above the 20-day moving average of 120.977 cents.

Futures made headway in anticipation of a rebound soon in cash hog and wholesale pork prices.

The morning’s average hog price in the western Midwest direct market slumped $4.90/cwt to $110.51 in light volume, according to USDA.

Separate government data showed the morning’s wholesale pork price dropped 84 cents/cwt from Monday to $118.58.

— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.

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