U.S. livestock: Cattle extend climb on robust packer margins

CME August 2019 live cattle with 20-, 50- and 100-day moving averages. (Barchart)

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures advanced for a fourth straight session on Thursday, led by the nearby August contract as robust profit margins for beef packers fueled expectations of strong demand for cash cattle, traders said.

“Packers are just raking it in, so the incentive is there to ramp up the kills,” said Tim Hackbarth, analyst with Top Third Ag Marketing in Chicago.

Demand for beef from retailers ahead of the Labour Day holiday has helped buoy packer margins. But some traders cautioned that the rally may be fading. They noted that deferred cattle futures, including the most-active October contract, trailed the gains in the thinly traded front contract, which expires on Aug. 30.

CME August live cattle futures settled up 2.3 cents at 104.975 cents/lb., while October live cattle ended up 0.875 cent at 101.1 cents/lb. (all figures US$).

October feeder cattle settled up 0.925 cent at 135.475 cents/lb.

“The packers are expected to go ahead and stretch and get some cattle this week … (but) the Labour Day buying is going to be done soon. Once that buying is done, the beef is going to roll over because it’s so high-priced,” said Dan Norcini, an independent livestock trader.

The U.S. Department of Agriculture (USDA) on Thursday quoted choice boxed beef cutout at $239.28/cwt, down $2.46 from Wednesday’s two-year peak. Select cutout rose 21 cents, to $215.91.

In contrast to cattle, CME lean hog futures slipped for a second day on plentiful hog and pork supplies.

Cash hog prices in the closely watched Iowa and southern Minnesota market fell $2.65 on Thursday, and the pork cutout fell $1.30, according to USDA.

Meanwhile, weekly export sales of U.S. pork for the week ended Aug. 15 totaled 18,500 tonnes, down nine per cent from the previous week, and included no major sales to China.

“We know we have this big supply of pork coming. And the demand is just not keeping up, without those strong export markets,” Norcini said.

CME October hogs settled down one cent at 62.3 cents/lb.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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