Chicago Mercantile Exchange live cattle futures settled slightly higher on Wednesday as investors anticipated steady cash cattle trade later this week, traders said.
The front month December live cattle closed up 0.225 cent per pound at 131.9 cents. February settled up 0.15 cent, at 132.8 cents (all figures US$).
Traders shrugged off news that U.S. regulators announced on Wednesday new guidelines to phase out certain antibiotics used as growth enhancers in livestock over a three-year period.
“It appears the Food and Drug Administration (FDA) aims to halt or curtail the use of antibiotics for weight gain,” said Craig Turner, a commodities broker at Chicago-based Daniels Trading.
If FDA’s plan goes through, it will mean cattle weights could come down over the long term, resulting in less supply, which may be bullish for cattle prices in the future, Turner said.
In the cash market, U.S. Plains cattle were priced at $133 to $134 per hundredweight (cwt) with packers bidding $129 in Texas and Kansas, feedlot sources said. Last week, Texas and Kansas cattle sold at $132, while trades were at $131 to $132 in Nebraska.
Weak profit margins and lacklustre beef demand may keep a lid on prices packers pay.
According to HedgersEdge.com, beef packer margins for Wednesday were at a negative $43.35 per head, compared with a negative $41.50 on Tuesday and negative $27.60 a week ago.
Wednesday morning’s wholesale choice beef price rose 80 cents from Tuesday to $202.93/cwt, and select cuts slipped 39 cents to $187.62, according to U.S. Department of Agriculture data.
CME feeder cattle ended higher following deferred-month live cattle futures.
January feeder cattle ended 0.125 cent per pound higher at 165.675 cents, and March closed at 165.5 cents, up 0.025 cent.
Fund selling pressured hogs
CME hogs ended narrowly mixed on Wednesday, while front-month December neared expiration and technical selling dragged on the February contract, traders said.
February, which will become the lead month after the December contract expires on Dec. 17, is at a sizable premium to CME’s hog index of 81.69 cents.
February futures triggered sell stops after dropping below the 100-day moving average of 88.385 cents.
Funds also sold the February contract and bought deferred months June and August, which limited losses in the back months, said Domenic Varricchio, commodities broker at Schwieterman, Inc.
USDA data on Wednesday showed average hog weights in Iowa/Minnesota for the week ended last Saturday averaged 282.4 lbs., a record high level for the sixth straight week.
The heavy weights continue to pressure pork product values because the larger animals create more pork supply in the meat pipeline, traders and analysts said.
“The heavier hogs make up for less hogs out there,” Varricchio said.
On Wednesday morning USDA reported the wholesale pork price tumbled $3.84 from Tuesday to $87.81/cwt. The weak pork product price was led by hams, which fell $6.22 to $84.25/cwt.
“Ham prices tend to fall off rather sharply once the Christmas buying is wrapped up,” said Dan Norcini, an independent livestock futures trader, referring to grocers buying to stock retail meat cases.
Cash prices for the closely watched Iowa/Minnesota hog market were not available on Wednesday afternoon, USDA said.
Spot December ended 0.1 cent/lb. higher at 80.925 cents. February hogs closed 0.95 cent lower at 87.775 cents.
— Meredith Davis reports on U.S. ag commodities for Reuters from Chicago.
New U.S. rules aim to cut antibiotic use in farm animals, Dec. 11, 2013