Chicago | Reuters — Chicago Mercantile Exchange live cattle futures peaked at five-month highs on Wednesday, sparked by short-covering and Tuesday’s steep climb in the wholesale beef (cutout) price, traders said.
Profit-taking and Wednesday morning’s modest cutout gains pulled futures from session highs, they said.
June closed up 0.725 cent per pound, to 155.8 cents, and August 0.65 cents higher at 153.525 cents (all figures US$).
Wednesday morning’s wholesale choice beef price rose 33 cents per hundredweight (cwt) from Tuesday, to $247.53. Select cuts was up seven cents, to $240.82, the U.S. Department of Agriculture (USDA) said.
Packers cut kills which improved their margins and underpinned beef cutout prices as supermarkets bought product for Father’s Day, traders said.
USDA estimated Wednesday’s slaughter at 91,000 head, down 20,000 from last week.
Futures’ discounts to last week’s cash prices provided more market support.
Cash bids in Kansas and Texas were at $152/cwt versus $158 asking prices, industry sources said. Last week, cash cattle sold at $155-$156.
Packers will continue curbing slaughters to create a backlog of cattle, said a trader who cited 40,000 more cattle for sale this week than a week ago.
Feedlots will fight selling cattle below $158 after processors tried to pay $5 lower for them last week, he said.
Corn futures losses and CME live cattle gains pushed up the exchange’s feeder cattle contracts.
August ended 2.55 cents/lb. higher, at 226.775 cents.
Mostly weak hog futures
CME lean hogs ended mostly weak, pressured by lower cash and wholesale pork values, traders said.
June, which will expire on Friday, garnered supported from its discount to CME’s hog index for June 8 at 82.3 cents.
June closed up 0.1 cent/lb., to 81.3 cents, July down 0.1 cent to 79.875 and August 0.15 cent lower at 79.25.
USDA data reported Wednesday morning’s average cash hog price in Iowa/Minnesota dropped $1.07/cwt from Tuesday, to $77.77.
Separate government data quoted the morning’s wholesale pork price at $86.26/cwt, down 48 cents from Tuesday.
Ample supplies weighed on cash and wholesale pork prices, a trader said.
Investors were nervous about increased hog production ahead based on Wednesday morning’s USDA monthly supply/demand report. It projected 2015 pork output at 24.5 billion lbs., up 7.1 per cent from 2014 due to higher-than-expected second quarter slaughter.
“Everyone knows production will be higher, but their is uncertainty about how much,” said independent market analyst Bob Brown.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.