Chicago | Reuters –– U.S. cattle futures climbed on Thursday, rising on technical buying and lower animal weights that suggested feedlots were aggressively marketing cattle to meet strong beef packer demand, traders and analysts said.
Both Chicago Mercantile Exchange live and feeder cattle futures were technically oversold after steep losses during the past two weeks. Investment funds were unwinding a record-large bullish bet in cattle amid expectations wholesale beef prices would decline.
However, U.S. Department of Agriculture data released at midday showed lower average U.S. cattle carcass weights, prompting futures to reverse from earlier losses. Cattle weights fell to 786 lbs. in the week ended May 6, down from 798 lbs. last week and 813 pounds a year ago.
“The biggest news is the drop in weights — the massive drop,” said Top Third Ag Marketing broker Craig VanDyke.
Most-active CME August live cattle rose to its session highs in the wake of the midday USDA data, before settling up 0.825 cent to 119.750 cents/lb. June live cattle finished 0.475 cent higher at 122.925 cents.
CME August feeder cattle gained 1.625 cents, to 149.350 cents/lb., further supported by declines in Chicago Board of Trade corn futures. Feedlot profit margins for fattening cattle generally rise when animal feed prices fall.
The gains in futures came despite lower prices for cash cattle and flat prices for choice-grade wholesale beef. Feedlot cattle on Thursday fetched $133 to $134 in Kansas and Texas, down from sales of $137-$138 last week.
Lean hogs futures also notched small gains after earlier trading lower on profit-taking in the wake of Wednesday’s three-month highs.
“(Hogs) were up near contract highs yesterday. I don’t think it’s a major surprise to see some selling here,” VanDyke said.
But hogs edged up at midday, following steeper gains in cattle. Hog prices also generally rise seasonally as U.S. temperatures begin to rise, slowing the rate of weight gain in animals, and as more U.S. consumers cook meat on outdoor grills.
CME June hogs finished up 0.25 cent to 79.15 cents/lb. July hogs climbed 0.275 cent, to 79.275 cents.
— Michael Hirtzer reports on commodity markets for Reuters from Chicago.