U.S. live cattle futures end mixed after wild ride

U.S. live cattle futures settled narrowly mixed on Wednesday, pressured by news that Russia may block some North American meat imports, but prices drew support from a tighter cattle supply outlook.

Chicago Mercantile Exchange (CME) spot February live cattle closed up 0.05 cent per pound at 125.775 cents. And most-actively traded April finished down 0.025 cent to 130.45 (all figures US$).

Russia may impose a temporary ban on the import of some U.S. and Canadian beef and pork products as of Feb. 4, amid concerns that they may contain a drug used to make animal muscle more lean.

A U.S. Meat Export Federation spokesman said that based on correspondence between food safety agencies in both countries, the possible restriction so far, may apply only to a small amount of chilled beef that is exported to Russia by air.

Still, CME live cattle approached Friday’s lows after cash cattle in the southern U.S. Plains moved at $122 per hundredweight (cwt), compared with $124-$125 last week, feedlot sources said.

"Apparently, one of the cattle marketing groups felt the heat from the lower futures this morning and sold cattle," said Hales Trading Co. president David Hales.

Packers are also unwilling to spend more for cattle, while trying to recover lost margins amid a push back by grocers reluctant to pay higher prices for beef.

The price for wholesale choice beef on Wednesday was $189.78/cwt, 81 cents lower than Tuesday; and select cuts fell $1, to $182.90, according to the U.S. Department of Agriculture.

HedgersEdge.com data showed the average beef packer margin for Wednesday at a negative $36 per head, compared with a negative $55.25 on Tuesday and a negative $46.90 on Jan. 16.

But futures clawed back from session lows, lifted by the prospect that fewer cattle will become available in the months ahead after historic drought last summer drove feed costs to all-time highs.

"Hopefully we’re going to go through two to four weeks of aggressive moving of cattle," said Archer Financial Services broker Dennis Smith.

"We get the weights to peak and come down and the numbers to drop off, you’re going to have a strong market someday again," he said.

Throughout the session, investors adjusted positions before the government’s monthly cattle-on-feed report on Friday (Jan. 25). Analysts expect the data to show increased placements last month.

Feeder cattle futures ended mostly firm as traders exited the January contract before it expires on Jan. 31, and bought deferred contracts. Deferred feeder cattle months also drew support from lower corn prices.

Spot January closed down 0.2 cent/lb. to 144.2 cents. Most-actively traded March was up 0.15 cent to 147.150 cents and April finished 0.35 cent higher at 150 cents.

Hogs mixed on spreads

CME hogs closed mixed, with February firm on bullish spreads in anticipation for cash hog prices to trend higher amid tight supplies.

The average hog price at the most-watched Iowa/Minnesota market on Wednesday was $87.67/cwt, $1.53 higher than on Tuesday, according to USDA.

Producers are current in sending their animals to market based on declining hog weights. Also, hog farmers may keep doors to swine buildings closed to retain heat, reducing the flow of hogs to packers.

USDA’s weekly average weight data showed hogs in the Iowa/Minnesota market last week at 274.9 lbs., down 1.6 lbs. from the week before and down 0.4 lb from the same period a year ago.

Spot February hogs settled up 0.275 cent/lb. to 85.975 cents. April ended at 88 cents, down 0.275 cent.

– Theopolis Waters writes for Reuters from Chicago.