Chicago | Reuters — U.S. live cattle futures ended sharply higher to limit up on Friday on in a short-covering and technical buying rally to six-month peaks fueled by strong demand for beef and expectations for higher cash market prices this week.
Cattle traders are still waiting for more widespread cash deals to develop at U.S. Plains feedlot cattle markets this week, with expectations for prices to be above the $108/cwt average prices a week ago (all figures US$). Cattle have very lightly traded in parts of the Plains at that price earlier this week.
Strong beef packer margins and tightened packer inventories following lighter-than-usual cash sales last week should help buoy cash prices, traders said.
“The packer burned inventory last week and he is going to have to pay up this week,” said Cassie Fish, an analyst and author of industry blog The Beef.
“I don’t know that I’ve ever seem beef demand as strong as it is domestically and globally,” she added.
Average beef packer margins were estimated at $195.70 per head on Friday, down from $237.45 a week ago but well ahead of margins at $142.50 per head a year ago, according to Denver-based livestock marketing advisory service HedgersEdge.com LLC.
Chicago Mercantile Exchange October live cattle ended up the daily three-cent limit at 113.8 cents/lb., propelled by short-covering and technical buying as the contract climbed above its summertime high to peaks not reached since March.
December live cattle ended up 2.65 cents at 118.05 cents. February 2019 to February 2020 contracts all posted life-of-contract highs for a second straight session.
The daily trading limit will expand on Monday to 4.5 cents following the limit-up close.
Feeder cattle futures followed live cattle higher and drew additional strength from low corn futures prices, which fell more than four per cent this week.
CME October feeder cattle ended 3.475 cents/lb. higher at 158.875 cents.
Lean hog futures were mostly higher as confirmation of African swine fever in Belgium, following news of its spread in China and Eastern Europe, fueled expectations for a rise in U.S. pork exports.
Belgium’s food safety agency on Thursday reported the country’s first case of African swine fever since 1985.
Hog traders are also closely monitoring Hurricane Florence, which came ashore in North Carolina, the No. 2 U.S. hog state.
CME October lean hogs ended up 0.55 cent/lb. at 56.225 cents, while December gained 0.725 cent, to 56.65 cents.
— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago.