Chicago | Reuters –– Chicago Mercantile Exchange live cattle futures closed sharply higher on Wednesday, with April and June up by the three-cents-per-pound price limit, led partly by their discounts to this week’s cash price expectations, traders said.
April and June finished at 156.575 and 148.475 cents/lb., respectively (all figures US$). Futures’ limit will be expanded to 4.5 cents on Thursday following Wednesday’s limit-up settlement.
“Even if packers paid what they did for cattle last week, futures will still be at a discount to cash,” a trader said.
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Bids for market-ready (cash) cattle in Kansas and Texas stood at $159 per hundredweight (cwt) versus up to $165 asking prices, feedlot sources said. Last week, cash cattle in the U.S. Plains moved at $161 to $162.50.
Packers have reduced slaughter rates to recoup lost margins, offset near-term tight supplies and lift wholesale beef prices, traders said.
Two packing plants may be closed on Friday for maintenance, a sign of not enough cattle for slaughter or that processors are trying to realign their margins, they said.
The day’s beef packer margins were a negative $42.45 per head, compared with a negative $54.40 on Tuesday and a negative $16.75 per head a week ago, according to HedgersEdge.com.
Short-covering contributed to futures’ upswing.
Fund buying developed after April and June broke through their respective 10-day moving average of 154.57 cents and 146.32 cents.
Investors await the U.S. Department of Agriculture’s monthly Cattle on Feed report on Friday.
Technical buying, buy stops and CME live cattle buying drove up the exchange’s feeder cattle contracts.
March closed 2.675 cents/lb. higher at 214.25 cents.
Hog futures losses
CME lean hogs settled lower, pressured by weak cash hog prices that stirred bear spreading in which investors sold April and simultaneously bought deferred months, traders said.
April closed 1.075 cents/lb. lower at 60.7 cents, and May ended down 0.925 cent at 71.15 cents.
On Wednesday morning, cash hogs in the Midwest sold mostly 50 cents/cwt weaker than on Tuesday, regional hog dealers said.
Packers have enough hogs for this week’s production, while some retailers bought pork to accommodate upcoming spring grilling advertisements, traders and analysts said.
USDA data showed the morning’s wholesale pork price jumped $1.15 per cwt to $69.31 from Tuesday.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.
