U.S. livestock: CME live cattle notch new high with cash, beef prices

Chicago Mercantile Exchange live cattle futures on Wednesday reached an all-time high, led by record-breaking prices for slaughter-ready cattle and beef at wholesale, traders said.

Wednesday afternoon’s wholesale choice beef price was $224.62 per hundredweight (cwt), which jumped $3.58 from Tuesday to its fifth successive record, according to U.S. Department of Agriculture data (all figures US$).

The price for select cuts rose $2.56 from Tuesday to $221.91/cwt, stretching their record run to nine days in a row.

Cash, or slaughter-ready, cattle in Texas and Kansas moved at mostly $142/cwt, $3 higher than last week’s record of $139 in the southern Plains, feedlot sources said.

Don Roose, an analyst with U.S. Commodities, attributes the record surge in live cattle and beef prices to a “perfect storm” as weather interruptions came at a time of already tight cattle numbers. And packers were caught short of supplies after closing plants during the year-end holidays, he said.

“Typically, when you have a market that is going vertical like this, it burns itself out faster than normal,” Roose said. One has to question at what point will grocers raise beef prices to where it turns off consumers, he added.

Packers cut production to offset fewer cattle while increasing beef costs to end users. That move by processors returned their margins back into the black for the first time since mid-September 2013.

Beef packer margins for Wednesday were estimated at a positive $3 per head, compared with a negative $24.80 per head on Tuesday and a negative $80.25 a week ago, as calculated by HedgersEdge.com.

Fund buying gave February and April CME live cattle an added boost to new contract highs of 140 cents and 139.25 cents in electronic trading.

February live cattle closed 1.775 cents per pound higher at 139.425 cents and April finished at 138.95 cents, up 1.15 cent.

CME feeder cattle set a fresh record high following buying in the live cattle market and lower corn prices.

January feeder cattle closed at 169.4 cents/lb., 0.8 cent higher, and March finished at 168.025 cents/lb., 1.2 cents higher.

Hogs feed off live cattle

The record surge in CME live cattle drove up hog futures, with speculators betting that shoppers will turn to pork as a cheaper alternative to beef, traders said.

Government data showed the afternoon’s wholesale pork price at $84.96/cwt, 94 cents lower than on Tuesday.

“The hog market is trying to keep up with cattle. But, we have plenty of pork around for the current level of demand,” Roose said.

From Monday to Wednesday, packers processed 1.284 million hogs, 180,000 more than last week’s weather-constricted slaughter and up 3,000 from a year earlier, according to USDA estimates.

Packers raised cash hog bids to accommodate the rest of this week’s production.

Wednesday afternoon’s average price of hogs in the Midwest direct market were up as much as $1.45/cwt to $76.62, based USDA data.

February hogs closed 0.6 cent/lb. higher at 86.6 cents. April ended at 91.55 cents, 0.875 higher.

— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.

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