Most Chicago Mercantile Exchange (CME) live cattle futures contracts eased Tuesday in anticipation of a seasonal top soon in beef markets and despite a jump to a record high for U.S. choice wholesale beef carcasses, analysts and traders said.
Analysts said there was a fierce battle in the cattle futures market, with market bulls citing the persistent climb to record highs in beef prices while market bears opined that beef markets likely are near a top and soon will decline.
A turn to warmer weather in the United States and pent-up demand for steaks and burgers ahead of the traditional grilling season sent wholesale prices for choice-grade beef to a record
high of $205.91 per hundredweight (cwt) on Monday, up 36 cents from the previous record set late last week.
“Beef is seasonally strong this time of year. It usually tops out about now but what is different this year from past years is the beef supply is lower, so there is some question if the top is in,” said Don Roose, president of U.S. Commodities, Des Moines, Iowa.
Recent improved profits by beef packers also were helping shore up the cattle futures market.
Estimated margins for U.S. beef packing companies were a positive $40.85 per head on Tuesday, down from $42 on Monday but up from a negative $15.95 a week ago, according to Denver-based marketing and advisory service HedgersEdge.com LLC.
“A lot of people thought $205 might be the top (wholesale carcass beef) but we’ve gone through that so there’s no indication the top is in, it looks like we’ll go even higher,” said Dennis Smith, a broker for Archer Financial.
“The seasonal demand is here; the warmer weather and the grilling season most definitely is helping,” Smith said.
Spot June cattle did end up 0.200 cent/lb. at 120.775 cents/lb. with the move to record-high beef lending support. Traders also said the contract was finding technical support at the 120 cents/lb. level.
“Futures just feel like a cork in the water right now. Every time they sell them down they pop right back up,” Smith said. “I’m expecting a rebound to $122 at least sometime soon in the June contract.”
Cattle for August delivery were down 0.475 cent/lb., at 120.4 cents.
Feeder cattle were mixed with nearby months firm on solid demand for heavier weight cattle to place in feedlots and on a weak tone in the Chicago Board of Trade corn futures market.
Cash feeder cattle at the benchmark Oklahoma City auction were $2/cwt higher for heavier steers and steady to $2 lower for lighter-weight feeders.
The demand was moderate to good and improved some from last week, especially for heavier-weight cattle.
CME feeder cattle futures for the thinly traded May contract were up 0.65 cent/lb. at 135.5 cents/lb.
Feeders for August delivery were up 0.225 at 146.425.
Lean hog futures rose on firm cash hog markets, higher wholesale pork prices and on prospects for a shift by consumers away from expensive beef to lower-priced pork.
CME May lean hogs were up 0.075 cent/lb. at 92 cents. Hogs for June delivery were up 1.675 cents, at 92.6.
Cash hogs were fully steady in the Midwest on Tuesday, movement was light and anticipated demand was good as the U.S. Memorial Day holiday and associated grilling season nears, dealers said.
“Cash hogs are still firm so for the short term we’re going higher but eventually I’m expecting a seasonal decline; it’s just a matter of the timing of it,” Smith said.
The U.S. Department of Agriculture late on Monday quoted the pork carcass cutout value up 83 cents/cwt, at $90.70.
Estimated margins for U.S. pork packing companies were at a negative $5.55 per head on Tuesday, up from a negative $6.25 on Monday and up from a minus $7.90 a week ago, according to Denver-based livestock marketing advisory service HedgersEdge.com LLC.
— Sam Nelson covers ag commodity markets for Reuters in Chicago. Additional reporting for Reuters by Alyce Hinton, Theopolis Waters and Michael Hirtzer in Chicago.