USDA data, Japan news boost U.S. live cattle

Chicago Mercantile Exchange live cattle futures surged more than two per cent on Monday, fueled by Friday’s bullish U.S. Department of Agriculture cattle on-feed report, traders and analysts said.

They also pointed to plans by Japan to relax restrictions on U.S. beef imports on cattle up to 30 months old, effective Feb. 1.

Last Friday’s USDA cattle report showed the number of cattle placed in feedlots fell in December from a year earlier, the seventh straight monthly fall.

"The report was bullish all the way around and confirmed that cattle numbers in the U.S. will continue to tighten in the months ahead because of prolonged drought," said Joe Ocrant, president of Oak Investment Group.

He said steps by the Japanese to allow more beef into their country were "friendly" for the futures market and the industry as a whole, but it was something that many traders and industry analysts had anticipated for some time.

Still, Friday’s bullish government cattle data and Monday’s Japanese beef import news sent those who had been recently short the market scrambling to cover those positions.

Also, fund buying was touched off when futures advances propelled the February and April contracts beyond their 10-day moving averages at 127.35 and 131.8 cents (all figures US$).

CME spot February live cattle closed at 128.95 cents per pound, up 2.65 cents, or 2.1 per cent. Most-actively traded April ended up 2.65 cents, or 2.03 per cent, at 133.4 cents.

Investors await this week’s cash cattle trade after futures widened their premium to slaughter-ready cattle last week that moved at $122-$124 per hundredweight (cwt).

Also, packers continue to wrestle with poor, but improving margins, and push-back by grocers against higher beef costs.

CME feeder cattle followed the higher live cattle market.

Spot January ended up 1.1 cents/lb., or 0.76 per cent, at 145.8 cents. Most-actively traded March finished at 149.9 cents, up 1.95 cents or 1.32 per cent.

Cattle pull up hogs

CME hog futures drew support from the steep climb in the live cattle market that offset lower cash hog prices in the near term, analysts and traders said.

Warmer weather in the U.S. Plains is giving hog producers a chance to move hogs that backed up on farms during last week’s wintry blast, pressuring cash prices, a trader said.

"But the warmup will be short-lived with colder weather expected to return to the Midwest later this week that could again put packers in a bind supply-wise," he said.

The average hog price in the most-watched Iowa/Minnesota market Monday morning was $83.99/cwt, down $1.78 from Friday, USDA said.

The average pork packer margin for Monday was a negative $5.30 per head, compared with a negative $8.65 on Friday, according to HedgersEdge.com.

Spot February hogs settled up 0.35 cents/lb., or 0.4 per cent higher, at 87.175 cents. Most-active April ended at 89.05 cents, 0.125 cents higher, or up 0.14 per cent.

– Theopolis Waters writes for Reuters from Chicago.