U.S. live cattle futures surged on Wednesday on fears that a winter storm rolling into the U.S. Plains could disrupt beef and pork production in the region, traders and analysts said.
Blizzard conditions and potentially heavy snows in parts of the western and northern Plains Thursday and Friday could slow transportation of animals to packing plants.
Also, the onset of colder temperatures tends to slow weight gains in livestock, making them less available to processors.
"Weather will be the big deal for the thin holiday futures market depending on how extensive and severe the storm is over the next couple of days," said K+S Financials analyst Jack Salzsieder.
CME livestock futures are vulnerable to broad price swings due to dwindling volume as many traders wind down for holiday vacations, he said.
Spot December cattle closed 1.25 cents per pound higher, or up 0.97 per cent, at 129.475 cents. Most actively traded February ended up 1.3 cents, or 0.98 per cent, at 134.25 cents (all figures US$).
Additional live cattle market support came from higher wholesale beef prices. Traders also adjusted positions before the U.S. government’s monthly cattle report on Friday (Dec. 21).
Analysts expect the U.S. Department of Agriculture’s cattle-on-feed report to show placements in November fell for a sixth straight month.
In separate USDA data, the wholesale price for choice beef Wednesday morning was $194.51 per hundredweight (cwt), up 58 cents from Tuesday; the select price was $176.64, $1.68 higher.
USDA’s cattle report is expected to confirm tighter cattle supplies in coming months after drought sent feed prices to record highs, traders and analysts said.
Grocers are booking beef ahead of the Plains’ storm and before the Christmas holiday on Dec. 25, a trader said.
Futures’ advances and the potential for a supply slowdown caused by weather backed sentiment for steady to higher cash cattle trade this week.
But packers may rely on ample inventories and periodically cut slaughter rates to avoid spending more for supplies than they have to.
Cash cattle bids for Texas and Kansas stood at $123/cwt against $127-$129 asking prices from sellers, said feedlot sources. Cash cattle last week brought $124-$124.50.
CME feeder cattle futures followed the higher live-cattle market and lower corn prices, helping feedlot demand for younger cattle.
January closed 1.275 cents/lb. higher, gaining 0.84 per cent, at 153.475 cents. March settled 1.35 cents higher, or up 0.87 per cent, at 155.75 cents.
Hogs jump on cash, weather
Hog futures gained for a third straight session, driven by wintry weather moving into the Plains that forced packers to hike cash hog bids for a second day in a row.
"It was a very constructive market with weather playing a part," said Archer Financial analyst Dennis Smith.
Packing plants will be dark on Tuesday for the Christmas holiday, a trader said. But, packers upped cash bids to keep hogs moving to packing plants during the storm, he said.
But hogs may back up on farms due to foul weather and plant closures over the holiday, resulting in a later glut of animals that could pressure cash prices, the trader said.
USDA Wednesday morning showed the average price for hogs in the most-watched Iowa/Minnesota market at $83.36/cwt, $1.77 higher than Tuesday.
February hog futures settled at 86.575 cents/lb., up 1.3 cents, or 1.52 per cent higher. April finished at 91.45 cents/lb. higher, up 1.175 cents or 1.3 per cent higher.
— Theopolis Waters writes for Reuters from Chicago.