U.S. feeder cattle futures notched a six-month high for the second day in a row on Wednesday as corn prices weakened, reducing feed input costs, analysts and traders said.
Short-covering and fund buying also put Chicago Mercantile Exchange (CME) feeder cattle in the win column for a sixth straight session.
"It's strictly a deal where you had short-covering and fund buying combined with the break in the corn," said A+A Trading broker Jim Clarkson.
CME January feeder cattle closed up 0.675 cent per pound, or 0.44 per cent, at 152.75 cents. March was 0.35 cent higher, or 0.23 per cent, at 154.725 cents (all figures US$).
Live cattle dip
CME live cattle ended moderately lower on profit-taking and cash cattle price uncertainty for this week, traders and analysts said.
Spot December cattle closed off 0.2 cent/lb., or 0.16 per cent, at 126.35 cents. Most actively traded February ended 0.15 cent weaker, or 0.11 per cent, at 131.8 cents.
"The market took a breather after that big run-up on Tuesday, and people are divided about how cash will pan out," a trader said.
Bids for cash cattle surfaced at $121 per hundredweight (cwt), while sellers priced their animals at $126 or better, feedlot sources said. Cash cattle last week fetched mostly $124.
Bullish investors expect no worse than steady cash prices based on improving packer margins and December futures trading above 126 cents/cwt.
HedgersEdge.com put the average beef packer margin for Wednesday at a negative $30.25 per head, compared with a negative $50 on Tuesday and a negative $58 on Dec. 5.
Market bears see packers drawing from pre-contracted supplies and reducing slaughter rates to avoid buying cattle in the cash sector.
So far this week, packers have processed 368,000 head of cattle, the same as a week earlier and 8,000 fewer than during the same period a year ago, according to the U.S. Department of Agriculture.
USDA showed the wholesale price for choice beef Wednesday morning at $196.01/cwt, down 16 cents from Tuesday; the select price was $175.22, up 55 cents.
Separate government monthly data showed beef exports totaled 223 million lbs. in October, up 14.7 per cent from September and down 2.9 per cent compared with October 2011.
December hogs down
Cash hog prices fell for a fifth straight day amid ample supplies, weighing on spot-December futures before they expire from trading on Friday, according to analysts and traders.
USDA Wednesday morning quoted the average price for hogs in the eastern Midwest direct market at $77.14 cents/cwt, $1.31 lower than Tuesday and down $6.78 from a week earlier.
Traders were unsure how to trade December futures, which stood at a considerable discount to the exchange's lean hog index at 85.4 cents.
Spot December hog futures settled at 82.075 cents/lb., off 0.025 cent, or 0.03 per cent.
Spreaders actively bought February futures because of the closer proximity to CME's strengthening hog index packer margins.
The average pork packer margin for Wednesday was estimated at a positive $5.45 per head, compared with a positive $2.90 on Tuesday and a negative $5.05 on Dec. 5, according to HedgersEdge.com.
And some are betting that fewer hogs will come to market next year, the result of producers who culled their herds due to high-priced feed in the aftermath of last summer's historic drought.
Most actively traded February finished at 85.65 cents/lb., 1.5 cents higher, or 1.78 per cent. April hogs closed at 90.475 cents, up 1.025 cents, or 1.15 per cent.
In U.S. exports, pork in October totaled 493 million lbs., 13.6 per cent more than the month before and up 2.2 per cent from the same period a year earlier, said USDA.
-- Theopolis Waters writes for Reuters from Chicago.