U.S. livestock: CME live cattle turn higher on short-covering

Chicago | Reuters — Chicago Mercantile Exchange (CME) live cattle futures on Monday closed higher on short-covering after last week’s heavy losses, traders said.

August ended up 0.075 cent per pound at 152.625 cents, October 0.45 higher at 150.45 and December one cent higher at 151.25 cents (all figures US$).

Futures made headway after settling down the maximum three cents per pound allowed under the daily price limit on Friday in the face of bearish near-term fundamental challenges. [Related story]

Monday morning’s choice wholesale beef price dipped 45 cents per hundredweight (cwt) from Friday to $260. Select beef sagged $1.41 to $251.59, the U.S. Department of Agriculture said.

Packers may be lowering the cost of beef it charges grocers looking to feature product for the Labour Day holiday, a trader said.

Processors are also discounting beef at wholesale after spending less for slaughter-ready, or cash, cattle last week, they said.

Last week, cash cattle in the U.S. Plains sold at $160 to $164/cwt, compared with $162 to $164 the previous week, feedlot sources said.

In a trading strategy known as bear spreading, investors sold the August live cattle contract and simultaneously bought back months in anticipation of steady or weak cash prices this week.

Increased year-over-year cattle weights suggest cattle, which had been fattened outside of feedlots longer due to healthy grazing conditions, might start coming to market during the second half of August, said Hales Cattle Letter author David Hales.

CME feeder cattle turned higher driven by short-covering, fund buying and live cattle futures’ turnaround.

August settled 2.15 cents/lb. higher at 217.475 cents, and September at 217.425, up 2.7 cents.

Live cattle pull up hog futures

CME hogs drew support from short-covering and spillover live cattle futures buying, traders said.

Futures drew more support from their price discounts to CME’s hog index at 120.99 cents, they said.

August closed up 0.325 cent/lb. to 114.55 cents, and October ended 0.85 cent higher at 100.175 cents.

Lower cash hog prices, tied to ample supplies of heavy-weight animals, limited August advances ahead of its Aug. 14 expiration date.

And packers who implemented normal August floater holiday schedules on Monday did not need as many hogs.

The morning’s average price of hogs in Iowa/Minnesota dropped $2.43/cwt in light volume from Thursday, to $111.90, the USDA said.

Government data showed packers on Monday processed 375,000 hogs, 38,000 more than last week but 45,000 less than a year ago.

Speculators bought back months with the view that the porcine epidemic diarrhea virus (PEDv) will mainly hurt production beginning this fall.

“Because of market uncertainty, and traders out for summer vacations, futures have been extremely volatile and may not stabilize until after Labour Day,” a trader said.

— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.

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