Monday April 21, 2014




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U.S. cattle, hogs gain on robust cash

Lower feed costs, improved pasture buoy feeder cattle

U.S. cattle and hog futures rose on Tuesday on firm live and wholesale cash markets, while feeder cattle climbed on waning costs to feed livestock and on improved cattle grazing prospects in the southern U.S. Great Plains, analysts and traders said.

Gains in each were once again slowed by cautious buying tied to ongoing concerns about the global economy, they said.

Chicago Mercantile Exchange (CME) October live cattle were up 0.2 per cent, or 0.25 cent per pound, at 123.275 cents/lb. December was up 0.2 per cent, or 0.25, at 126.375 (all figures US$).

"The market is trying to find a level of equilibrium. The demand is good, there's good demand for meat protein but when we get up to a certain level then they worry about the economy," said Gary Lark, an independent cattle trader.

Lark said there was good support in the cattle market roughly in the lower $120 per hundredweight (cwt) area and stiff resistance in the upper $120 region.

"There was good demand, technical support from funds and open interest increased in the December," said Dennis Smith, a broker for Archer Financial.

The U.S. Department of Agriculture (USDA) boxed beef report on Tuesday showed wholesale choice beef at $190.89/cwt, up $1.70/cwt and select at $177.17, up 0.55 cent/lb.

"Boxed beef was firm but they're still not moving a lot and there are still a lot of macro worries in this market... beef exports are a key to this market now," said Jack Salzsieder, analyst for K+S Financials.

USDA in its weekly export sales report last Thursday said U.S. export sales of beef during the week ended Sept. 20 totaled 9,800 tonnes, down 10 per cent from the previous week and down 36 per cent from the prior four-week average.

"There are rumours of a pickup in beef exports, we've had two weeks of slow exports," Smith said.

The average packer margins were a negative $44.95/cwt compared with a negative $52.15 on Monday and a negative $37.15 a week ago, according to HedgersEdge.com.

A slowdown in cow slaughter was helping trim beef supply, but "there's not a lot of beef moving and margins are still in the red," a trader said.

Packers were bidding $121/cwt for cash slaughter cattle and offers were at $125/cwt, trade sources said.

Improved fall grazing

CME feeder cattle for October delivery were up 0.48 per cent or 0.7 cent/lb. at 145.375 cents/lb. December was up 0.6 per cent, or 0.875 cent, at 146.50.

"Part of this is due to lower grains, especially in the feeders," Lark said, referring to Tuesday's gains in livestock futures markets, including the feeder cattle futures.

Lower feed costs make feeder cattle a more attractive investment for cattle buyers at the nation's major feedlots.

Chicago Board of Trade (CBOT) December corn futures soared their daily 40 cents per bushel trading limit on Friday on a bullish government stocks report and feeder cattle plunged their daily three cents/lb. limit on that day.

Corn futures began retreating on Monday and showed signs of stabilizing on Tuesday.

And, "the rains in Oklahoma and Texas... helped feeder demand because there are better prospects for fall pasture now," Salzsieder said.

The worst drought in over 50 years had nearly decimated pasture or grazing prospects in the U.S. Great Plains. But rain showers in late September in the south led to outlooks for early seeding of hard red winter wheat and improved prospects for wheat pasture for young cattle.

Jump in cash hogs

An uptick in cash hog markets and continued profit by hog packers combined to lift the hog futures market, traders said.

CME October hogs were up 2.03 per cent, or 1.575 cents/lb., at 79.15 cents/lb. December was up 2.3 per cent or 1.725 at 76.850.

"Cash hogs are up, pork product is up and there was a technical breakout on charts," a CME hog trader said.

"Hogs are going to market at lighter weights because of the high priced corn and this is taking some of the supply off the market," he said.

U.S. Midwest cash hogs traded mostly higher on Tuesday with prices in the key Iowa/southern Minnesota market soaring $3/cwt on brisk demand from packers.

The average packer margin was estimated at $3.15, compared with $5.05 on Monday and $6.20 a year ago," according to HedgersEdge.

"Pork product is maybe close to a bottom. It's been trying to signal that for a couple of weeks. Pork cutout was up and packers are making money," Salzsieder said.

-- Sam Nelson writes for Reuters from Chicago. Additional reporting for Reuters by Alyce Hinton in Chicago.


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