U.S. livestock: Bargain buying strengthens live cattle futures

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Chicago / Reuters – Chicago Mercantile Exchange live cattle closed steady to higher on Thursday, with support from bargain buying and futures’ discounts to initial cash prices, said traders.

Investors bought deferred months and simultaneously sold August futures after digesting last Friday’s bearish U.S. Department of Agriculture cattle reports.

August ended unchanged at 114.300 cents per pound. October closed up 0.200 cent to 113.575 cents, and December was 0.425 cent higher at 114.400 cents.

On Wednesday, packers bought a small number of slaughter-ready, or cash, cattle in Nebraska at $117 per cwt, down as much as $3 per cwt from last week.

Other cattle bids in Nebraska, and elsewhere in the U.S. Plains, range from $117 to $118 per cwt against $120 asking prices.

Despite their favorable margins, processors are hesitant to raise bids given seasonally slack wholesale beef demand and the outlook for increased supplies.

“We need the beef cutout, or wholesale price, to go lower to encourage retailers to feature beef,” said CattleHedging.com president Larry Hicks.

Beef cutout values are expected to mount a comeback when grocers buy product for the U.S. Labor Day holiday and U.S. government and state institutions purchase product for school lunch programs, said analysts and traders.

They said solid U.S. beef export demand remains a bright spot for the industry.

On Thursday, USDA’s export sales report for the week ended July 20 showed U.S. beef sales at 13,900 tonnes, mostly to South Korea, compared to 12,400 tonnes in the previous week.

Technical buying and live cattle futures advances boosted CME feeder cattle contracts. August feeders ended 1.350 cents per pound higher at 147.825 cents.

Uneven hog market settlement

CME lean hog August and October futures benefited from their discounts to the exchange’s hog index for July 25 at 89.84 cents, said traders.

They said some market participants bought nearby futures and at the same time sold deferred months, thereby pressuring those contracts.

August closed 0.250 cent per pound higher at 82.250 cents, and October up 0.025 cent to 67.675 cents.

December ended down 0.125 cent to 61.800 cents, and February 0.250 cent lower at 66.475 cents.

Uneasiness that cash and wholesale pork values, led mainly by record-high pork belly prices, may have peaked seasonally capped front-month market gains.

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