U.S. livestock: Surging beef prices boost CME live cattle to new high

Chicago Mercantile Exchange live cattle futures on Tuesday rose to an all-time, fueled by persistent record-high wholesale beef prices that ignited short-covering, traders said.

The morning’s wholesale choice beef price, or cutout, was $219.97 per hundredweight (cwt) in light volume. That price surged $3.03 from Monday to its fourth consecutive record, according to the U.S. Department of Agriculture.

Select cuts jumped $3.39 from Monday to $218.15/cwt, which extended their record streak to eight straight days.

Beef prices posted fresh records after packers curbed slaughters, while charging end users more for product, to counter costly cattle and recoup lost margins.

Beef packer margins for Tuesday were estimated at a negative $24.80 per head, compared with a negative $20.25 per head on Monday and a negative $76.45 a week ago, as calculated by HedgersEdge.com.

Processors have not responded to sellers who this week are asking $141 to $142/cwt for their cattle, feedlot sources said. Last week, cattle sold at a record $140.

Some packers that weeks ago negotiated pre-contracted beef orders with their clients may have misjudged the availability of cattle, Linn Group analyst John Ginzel said.

Retailers scrambled to restock meat cases to accommodate shoppers who initially stayed home to ride out last week’s harsh weather.

Brutal cold that accompanied the storm slowed down cattle weight gains. And, snow-covered roads made it difficult to transport livestock to market.

Futures’ upward momentum attracted fund buying.

CME live cattle and hog fund investors also sold, or rolled, the February contract and mainly bought the April month in conjunction with the process known as the “roll” by followers of the Goldman Sachs Commodity Index. Monday was the last official day for the roll procedure.

February live cattle closed 1.05 cents per pound higher at 137.65 cents and April finished at 137.8 cents, up 0.725 cent.

CME feeder cattle drew support from the higher live cattle market, technical buying and weaker corn prices.

January feeder cattle closed at 168.6 cents/lb., 0.775 cent higher. March finished at 166.825 cents/lb., up 0.35 cent.

Hogs gain with live cattle

Speculator investors bought CME hogs with the view that consumers would turn to relatively low-cost pork as beef prices marched higher, traders and analysts said.

“The higher beef goes, the better this pork demand is going to get,” said Archer Financial Services broker Dennis Smith.

The morning’s government data showed the wholesale pork price at $85.05/cwt, $1.88 higher than on Monday.

Hog futures gained in the face of sharply lower cash prices after last week’s wintry weather delayed the delivery of hogs to packers into this week.

USDA data showed Tuesday morning’s average price of hogs in the closely watched Iowa/Minnesota market dropped $3.31/cwt from Monday to $74.36.

The government estimated the Monday and Tuesday combined hog slaughter at 855,000 head, 176,000 more than a week ago.

February hogs closed 0.625 cent/lb. higher at 86 cents. April ended at 90.675 cents, up 0.3 and above the 100-day moving average of 90.59 cents.

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

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