U.S. livestock: Cattle futures rally after bullish USDA data

CME January 2019 feeder cattle, with 20-day moving average. (Barchart)

Chicago | Reuters — Chicago Mercantile Exchange cattle futures were higher on Wednesday, extending earlier small gains after government supply reports showed fewer-than-expected U.S. cattle supplies, traders said.

U.S. Department of Agriculture monthly Cattle on Feed data showed 11.692 million cattle in U.S. feedlots as of Nov. 1. That figure was three per cent higher than a year ago but below analysts’ expectations for a 4.4 per cent increase.

Placements of cattle in feedlots during October totaled 2.248 million, down six per cent from a year ago and well below expectations for only a 0.9 per cent decline. Fewer cattle in feedlots suggested less would be available to beef packers, largely between March and June of 2019.

“It means the supplies are going to tighten up a little bit as we get into next year,” said Don Roose, president of the brokerage U.S. Commodities. “It was a report that basically was positive across the board.”

Live cattle futures jumped more than one per cent after the midday data while feeder cattle gained as much as two per cent before each market pared gains. February live cattle settled up 1.025 cents at 120.75 cents/lb., while January feeder cattle climbed 1.75 cents, to 148.625 (all figures US$).

Uncertainty over how aggressively beef packers would bid to buy cattle in cash markets limited potential gains in futures despite the supportive USDA data, traders and analysts said.

Separate USDA monthly data showed 515.7 million lbs. of beef and 570.6 million lbs. of pork in cold storage at the end of October, each relatively close to analyst estimates for 512.7 million lbs. of beef and 573.4 million pounds of pork.

Abundant supplies of both red meat and poultry have anchored meat prices and prices for cattle, hogs and chicken this year.

However, the spreading African swine fever virus in top pork consumer and producer China has bolstered hog futures for weeks.

China on Wednesday issued new rules to tighten notification of cases of African swine fever, including incentives for whistleblower, amid concerns that outbreaks of the highly contagious disease are being under-reported. There have been more than 60 outbreaks in 18 provinces since August.

CME February lean hogs settled down 0.95 cent at 66.175 cents/lb., declining the second straight session after surging to a life-of-contract high earlier on Tuesday.

CME livestock trading will halt on Thursday for the U.S. Thanksgiving Day holiday.

— Michael Hirtzer reports on commodity markets for Reuters from Chicago.

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