U.S. livestock: CME cattle up on technical buying

CME December 2018 live cattle, with Bollinger (20,2) bands. (Barchart)

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures closed higher on Tuesday, with the most-active December contract rallying from a one-week low on technical buying and anticipation of strong consumer demand, traders said.

The market shook off pressure from bearish data in Monday’s U.S. Department of Agriculture cold storage report, which showed total frozen beef supplies as of Aug. 31 at 503.4 million lbs., a record high for the month.

Friday’s USDA Cattle on Feed report was bearish as well, showing a larger-than-expected number of cattle on feed as of Sept. 1.

“When you have bearish fundamentals and yet the market is not moving lower, you are not in a bear market,” said Jeff French, an analyst with Top Third Ag Marketing in Chicago.

A strong U.S. economy added support, French said, noting record highs set last Friday on the S+P 500 and the Dow Jones Industrial Average, along with low unemployment.

“When the U.S. consumer has money in their pocket, they prefer beef, and the demand will reflect that,” French said.

CME October live cattle futures settled 0.175 cent higher at 112.350 cents/lb. and most-active December ended up 0.2 cent at 117.2 cents (all figures US$). CME October feeder cattle finished up 0.175 cent at 156.475 cents/lb.

Commodity funds have been adding to their net long position in live cattle futures. The last weekly commitments report from the U.S. Commodity Futures Trading Commission showed managed funds expanding their net long to 71,138 contracts in the week to Sept. 18, the widest since March.

Lean hog futures also rose, buoyed by strong cash markets and expectations that the spread of African swine fever in China’s hog herd could spur export demand for U.S. pork.

“The cash and the cut-out have been on fire. If we have issues down the road with this African swine fever, we want to secure the supplies now, versus waiting for later. The packer margins, they’re making money,” said Don Roose, president of Iowa-based U.S. Commodities.

China’s agriculture ministry said Tuesday that Beijing must be supplied with sufficient amounts of pork. China, the world’s top pork producer, has seen a steady stream of new outbreaks since the first case was reported in early August.

“The impact of African swine flu is bullish to every protein in the world. And it does not look like it’s slowing down,” French said.

CME October hog futures settled up 1.425 cents at 62.425 cents/lb. after reaching 62.725 cents, its highest since June 20. December hogs ended up 0.775 cent at 57.75, halting a two-session slide.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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