U.S. livestock: Cattle surge on technical buying, packer demand

Chicago | Reuters — Cattle futures jumped the most in more than a month on Monday, buoyed by technical short covering and optimism that demand from beef packers that resulted in last week’s large cattle slaughter will continue this week, traders and analysts said.

Front-month June live cattle futures briefly rose by their daily three-cent price limit, before settling up 2.525 cents at 104.925 cents/lb. while the most-active August contract ended 2.4 cents higher at 100.625 cents (all figures US$).

The June contract’s percentage gains of 2.7 per cent were the largest since April 4 and followed a nearly five per cent weekly drop last week. August feeder cattle futures were up 2.875 cents at 140.5 cents/lb.

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Some traders were exiting short bets ahead of a monthly U.S. cattle supply report due on Friday and the three-day U.S. Memorial Day holiday weekend. Commodity Futures Trading Commission data released last week showed speculative investors adding new short bets and cutting long positions.

The cattle slaughter of 660,000 head last week was up from the same week in 2017 of 612,000 head, and the year-to-date slaughter is up 2.8 per cent from last year, according to the U.S. Department of Agriculture.

“Not many guys want to hold sizable short positions ahead of a long weekend,” said Top Third Ag Marketing analyst Craig VanDyke. “We’ve had some monster kills the last two weeks and the (beef) product has been moving very well.”

Increased slaughter suggested packers were enjoying robust demand for beef. Sales of beef and other meats typically spike in the summer, when more U.S. consumers cook on outdoor grills.

News of easing trade tensions between the U.S. and China also underpinned cattle prices, even though China was unlikely to significantly boost its imports of U.S. beef, the analysts said.

Hog futures were lower at the Chicago Mercantile Exchange, pressured by technical selling and despite hopes that China could eliminate a tariff on imports of U.S. pork.

Chicago Mercantile Exchange June lean hogs were down 0.7 cent at 74 cents/lb., the lowest since May 7.

The contract could test its lifetime lows reached early in April, VanDyke said.

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

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