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USDA report lifts U.S. live cattle futures

Chicago Mercantile Exchange live cattle futures climbed on Monday in response to Friday’s bullish U.S. Department of Agriculture monthly cattle-on-feed report.

The report showed the number of cattle placed in U.S. feedlots in August dropped 11 percent from a year earlier to their lowest level for that month in 17 years.

The government’s monthly cattle data confirms already tight supplies and fewer animals coming to market through next year, analysts and traders said.

Monthly cold storage data from USDA was due on Monday at 2 p.m. CT. The report is to include August total beef and pork inventories.

Investors said Monday morning’s firm wholesale beef prices, and higher cash cattle values last week, suggest both markets have forged a seasonal bottom.

USDA data Monday morning showed the wholesale choice beef price, or cutout, at $193.09 per hundredweight (cwt), up 70 cents from Friday. Select cuts were 49 cents higher at $176.45 (all figures US$).

Last week, cash cattle in Texas and Kansas fetched $124/cwt, which was $1 higher than the previous week, feedlot sources said. Live-cattle in Nebraska a week ago moved at $125, up $1 to $1.50 from the week before.

Traders are waiting for feedlots to count the number of animals available for this week.

Live cattle October closed up 0.65 cent/lb. at 126.6 cents. December finished 0.75 cent higher at 130.5 cents.

Feeder futures closed higher with support from CME live cattle advances and anticipation of tighter feeder cattle supplies.

Spread traders bought October futures and sold the September contract ahead of its expiration on Sept. 26.

September ended 0.525 cent/lb. higher at 157.625 cents. October settled 1.875 cents higher at 162.1 cents.

Hogs firm on discount

CME hogs’ discount to the exchange’s hog index, which was at 98.05 cents, underpinned the October contract, traders said.

October hogs finished up 0.125 cents/lb. at 90.175 cents, and December at 86.425 cents, 0.35 cent higher.

“People are going to chase (buy) October as long as the index keeps going up,” a trader said.

Uncertainty about cash hog prices in the near term limited futures’ advances.

Some processors cut slaughter to counter current tight supplies, which returned packer margins back in the black.

HedgersEdge.com estimated U.S. pork packer margins on Monday at a positive $5.50 per head, compared with a negative $2.20 on Friday and a negative $0.95 a week ago.

Pork packers on Monday processed 419,000 hogs, 9,000 less than last week and 15,000 fewer than a year ago, according to USDA.

Spread traders bought December futures and sold October and February contracts.

And speculative buyers purchased deferred CME hogs in the belief that the spread of the Porcine Epidemic Diarrhea virus (PEDv), first reported in May and which is deadly to baby pigs, can reduce supplies in the coming months.

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

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