U.S. livestock: CME live cattle pivot higher on bargain buying

Chicago | Reuters — Chicago Mercantile Exchange live cattle turned up sharply on Friday, with support from short-covering and bargain buying after Thursday’s losses that were partly led by U.S. trade uncertainty, said analysts and traders.

On Friday China said it planned to impose similar size tariffs soon after Washington announced duties on $50 billion of Chinese goods (all figures US$).

Some CME live cattle investors had feared China would slap higher tariffs on U.S. beef after imposing an extra 25 per cent duty on U.S. pork in early April.

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Opening the Chinese market to U.S. beef in June 2017 presents an opportunity for growth, but up to this point it is not a major importer of U.S. beef, said independent livestock futures trader Dan Norcini.

Instead, CME live cattle buyers focused on futures’ bullish price discount to prices for market-ready, or cash, cattle.

Packers want to buy cash cattle in the U.S. Plains for $110/cwt amid abundant supplies. Sellers are asking for as much as $120 while eyeing slipping, but historically high, packer margins.

On Thursday a few cash cattle in Nebraska brought $110/cwt, down $4-$5 from last week.

Fund buying provided more lift to live cattle contracts that broke through technical resistance levels.

June live cattle closed 2.2 cents/lb. higher at 108.45 cents, and August ended 2.9 cents higher at 104.775 cents. Both contracts landed above their respective 10-day moving averages of 107.857 cents and 104.013 cents.

Live cattle’s rebound and technical buying rallied CME feeder cattle contracts. August closed 4.275 cents/lb. higher at 147.95 cents.

Hog futures end mostly weaker

CME hog investors sold deferred contracts and simultaneously bought July stirred by soaring cash and wholesale pork prices as supplies diminish seasonally, traders said.

Technical selling along with caution over U.S. pork trade with China, Mexico and Canada further weighed on August futures and remaining 2018 trading months.

“Any damage as far as U.S. pork export share going into China has already been done with those tariffs already in place,” said Norcini.

Trade issues regarding Canada and Mexico are worrisome because they are larger markets for pork than China, he added.

July hogs ended up 0.1 cent/lb. at 81.725 cents. August closed down 0.35 cent at 78.250 cents, and below the 100-day moving average of 78.827 cents. October finished 0.375 cent lower at 64.275 cents.

Reporting for Reuters by Theopolis Waters in Chicago.

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