Chicago | Reuters –– Chicago Mercantile Exchange live cattle futures climbed nearly two per cent on Wednesday, their biggest one-day percentage increase in 1 1/2 months, driven by strong cash price expectations for this week, traders said.
October live cattle ended up the maximum three cents per pound daily price limit at 155.425. December closed at 158 cents, 2.475 higher.
A week ago, packers unexpectedly spent more for market-ready, or cash, cattle for the holiday-shortened workweek, which suggested they need supplies in the near term, traders and analysts said.
Last week, packers in the U.S. Plains paid upwards of $158 per hundredweight (cwt) for cash cattle, up as much as $5 from the week before.
October CME live cattle led advances, partly due to its sizable price discount to last week’s cash returns.
The recent uptick in wholesale beef prices encouraged futures buyers, despite worries about possible waning beef demand after Labour Day as grilling gives way to cooking indoors.
Wednesday afternoon’s choice wholesale beef price jumped $1.47/cwt from Tuesday to $247.58. Select gained 11 cents to $233.94.
CME feeder cattle end in positive territory for a ninth consecutive session, led by live cattle market buying and sharply lower corn prices.
September closed 2.45 cents higher at 222.7 cents, and October 2.95 cents higher at 221.775 cents.
Hogs turn mostly lower
CME hogs finished mostly lower, pressured by profit-taking and bullish spreads that consisted of traders who simultaneously sold back months and bought the October contract, traders said.
October closed 1.225 cents/lb. higher at 101.1 cents. December ended down 0.3 cent to 93.1 cents, and February 1.125 cents lower at 90.975 cents.
October hogs also drew support from higher cash prices as packers bought livestock for early next week’s production.
The afternoon’s average price of hogs in Iowa/Minnesota rose 87 cents/cwt from Tuesday to $94.18, according to USDA.
Investors actively sold deferred contracts with the view that sharply lower corn prices may encourage producers to feed more hogs and nourish them to higher weight.
Fund selling developed after February futures drifted below its respective 40-day and 100-day moving averages of 91.98 and 90.86 cents.
Bullish traders may have lightened up some of their long positions following word that Zoetis Inc. was granted a conditional license from USDA for its vaccine against porcine epidemic diarrhea virus, which has killed millions of piglets since last year. [Related story]
The vaccine “could be a factor for some of the selling. Although, from what we’re hearing these vaccines overall don’t seem to be very effective,” said Archer Financial Services broker Dennis Smith.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.