Chicago | Reuters — Chicago Mercantile Exchange live cattle futures posted significant gains Friday on fund buying and positioning before the U.S. Department of Agriculture (USDA) monthly Cattle-on-Feed report at 2 p.m. CT, traders said.
Analysts expect Friday’s report to show fewer cattle entered feedyards last month than a year ago.
April ended 1.875 cents per pound higher at 161.175 cents, and June 2.175 cents higher at 151.2 cents (all figures US$).
Futures’ discounts to prices for market-ready (cash) cattle generated further buying.
Packers who increased production paid the same for cattle as last week after getting caught short of supplies, analysts said.
This week, cash cattle in the U.S. Plains traded lightly at $157 to $160.50 per hundredweight (cwt), compared to $160 to $163 last week, said industry sources.
“It is hard to sell that discount in the June (futures) when the packers keep putting steady money on the table,” independent futures trader Dan Norcini.
If the beef cutout has again topped out, processors will lose their margins unless they buy cattle cheaper, he said.
The day’s beef packer margins were a positive $47.35 per head, compared with a positive $33.25 on Thursday and a positive $10.55 last week, according to HedgersEdge.com.
Friday morning’s choice wholesale beef price, or cutout, was at $258.78/cwt, $1.23 lower than on Thursday. Select cuts dropped $1.76, to $249.28, the USDA said.
Retailers are cautious about purchasing high-priced beef with plentiful less-costly pork and chicken available, traders said.
CME feeder cattle rose on technical buying, lower corn prices and live cattle market advances.
April, closed up 0.575 cent/lb. to 214.85 cents, and May 2.825 cents higher at 214.075 cents.
Live cattle lift hogs
CME lean hogs closed higher on short-covering, spillover live cattle futures support and speculative buying, traders said.
May closed up 0.025 cent/lb. to 71.95 cents, and June 1.125 cents higher at 79.45 cents.
China may be eyeing U.S. pork to offset their ban on chicken from the U.S., imposed earlier this year over bird flu worries, said Norcini.
Cash hog and wholesale pork prices offered no clear near-term fundamental direction.
On Friday, cash hogs in the U.S. Midwest sold steady to $1/cwt higher on light demand, said regional hog dealers.
USDA data showed the morning’s wholesale pork price down 29 cents/cwt to $69.38, after surging by more than $2 on Thursday.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.