Chicago | Reuters — U.S. cattle futures closed narrowly mixed on Thursday with the spot February contract drifting lower in rangebound trade, awaiting direction from cash markets, while back months firmed on optimism about the U.S. economy, traders said.
Feeder cattle futures rose as prices for corn, the main feed grain for cattle, retreated from this week’s six-year highs.
“Grains were taking a breather, and that gave feeder cattle an opportunity to rally,” said Dan Norcini, an independent livestock trader.
Chicago Mercantile Exchange (CME) February live cattle futures settled down 0.025 cent at 115.975 cents/lb., staying inside of Wednesday’s trading range, while back months closed higher (all figures US$).
CME March feeder cattle ended up one cent at 137.575 cents/lb.
Deferred contract months in the cattle and hog markets posted the biggest gains on Thursday, buoyed by fresh highs on Wall Street and expectations a Democrat-controlled Congress will deliver more stimulus spending to help the U.S. economy recover from a pandemic-induced downturn.
“That is all money flowing in from index funds,” Norcini said, “in anticipation of improving beef and pork demand as the year progresses, as the vaccines become more widespread and the lockdowns become more a thing of the past.”
Front-month hog futures were pressured by ample hog supplies and lacklustre cash markets as meat packers work through backlogs caused by holiday shutdowns. CME February lean hogs ended down 0.65 cent at 69.125 cents/lb., at a premium to the CME’s lean hog index at 62.42 cents.
“It’s going to be hard to move February hogs higher if the cash isn’t moving higher as well,” Norcini said.
Tyson Foods said it resumed slaughtering hogs at a plant at Columbus Junction, Iowa, three weeks after idling the facility because of a mechanical malfunction.
However, as in the cattle market, deferred hog futures found support from speculators investing in commodities as a hedge against inflation.
“There is a growing sense that the commodity sector as a whole is going to do very well in 2021,” Norcini said. “So people are buying out in those further-out months, positioning for that.”
— Julie Ingwersen is a Reuters commodities correspondent in Chicago.