Chicago | Reuters –– Chicago Mercantile Exchange (CME) live cattle futures closed sharply higher Thursday, pushed up by short-covering in response to higher-than-expected prices for slaughter-ready or cash cattle, traders said.
Cash cattle in Texas and Kansas moved at $148 per hundredweight (cwt), up $3 from a week ago, according to feedlot sources (all figures US$). Cattle cash in Nebraska sold at mostly $149 to $150, $3 to $4 higher than last week, they said.
Prices for cash cattle led the way for futures that already were at a discount to last week’s cash results, said Dennis Smith, a broker at Archer Financial Services.
Fewer animals for sale this week and strong futures prices forced packers to spend more for supplies than expected, traders and analysts said.
Investors periodically bought the August contract and at the same time sold deferred months in a trading strategy known as bullish spreading.
CME live cattle received an added boost from buying in the nearby feeder cattle market.
Consolidation may be on tap for futures on Friday as investors even up positions before the weekend, which may include profit-taking after contracts hit new highs on Thursday, a trader said.
June ended at 146 cents, up 2.975 cents and posted a new contract high of 146.025 in electronic trading. August closed 2.85 cents higher at 145.05, and marked a fresh contract high of 145.2 cents.
CME feeder cattle set a new high in light volume, driven by strong live cattle contracts, fund buying and buy stops.
August finished 2.975 cents per pound higher at 205.85 cents, and September was up 2.9 cents at 206.525 cents.
Hogs gain with cash prices
CME hogs landed in positive territory, supported by higher prices for market-ready hogs, traders said.
USDA’s Thursday afternoon average hog price in the Iowa/Minnesota market was up $1.02/cwt from Wednesday at $116.66.
Packers bought hogs to top off inventories for this week, while carrying over animals into early next week.
Traders sold the CME hog spot-June contract and bought back months before the spot month expires on Friday.
Following the June futures expiration, investors will consider whether the July contract is overpriced based on CME’s hog index at 112.46 cents.
Speculators purchased summer and fall contracts with the view the porcine epidemic diarrhea virus will further tighten hog production at that time.
June hogs ended unchanged at 115.975 cents. July closed up 0.9 cent at 125.925, and August at 130.8 cents, 0.85 cent higher.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.