Chicago U.S. feeder cattle futures rallied almost one per cent on Monday, lifted by short-covering as corn prices fell more than two per cent amid fund liquidation, improving feedlot demand for younger cattle.
Feeder cattle at the Chicago Mercantile Exchange (CME) garnered further support from gains in its live cattle market.
"When the corn market sells off, feeders (futures) have the ability to go quite a bit higher. Because of the lower corn market, there's still demand for feeders (cattle)," said Lane Broadbent, vice president of KIS Futures.
Spot October feeder cattle closed 1.25 cents higher, or 0.87 per cent, at 144.350 cents per pound. Most-actively traded November closed at 145.55 cents, up 1.325 cents or 0.92 per cent (all figures US$).
Live cattle turn up
CME live cattle turned higher, as strong wholesale beef prices prompted short-covering, analysts and traders said.
They said some investors adjusted positions in advance of the U.S. Department of Agriculture's cattle-on-feed report to be issued on Friday.
Those polled by Reuters so far said fewer cattle were likely placed in feed yards last month versus a year earlier after the worst drought in more than 50 years sent feed costs to all-time highs last summer.
Spot October live cattle closed up 0.25 cent/lb., or 0.2 per cent, at 124.15 cents. December ended at 125.975 cents, up 0.475 cent or 0.38 per cent.
The wholesale price for choice beef on Monday morning jumped $2.22 per hundredweight (cwt) to $193.89 and select cuts climbed $1.79 to $178.83, according to USDA estimates.
But uncertainty about subsequent deliveries and cash cattle price direction limited futures' advances.
R.J. O'Brien floor manager Jim Brooks said people were waiting to see whether the 12 deliveries reported by the exchange on Friday would be reissued later on Monday.
Feedlots continued to count the number of cattle up for sale this week. Cash cattle last week moved mostly at $125/cwt.
December hogs gain
Aside from December hog futures that were underpinned by higher cash hog values, other months succumbed to bearish spreads because of lower corn prices, analysts and traders said.
The view among spreaders is that the premiums in the deferred months may not be justified if feed costs continue to decline.
The average price for hogs in the most-watched Iowa-Minnesota market on Monday morning came in at $82.63/cwt, up 91 cents from Friday, USDA said.
Packers raised bids for cash hogs to assure themselves of supplies through the middle of the week, a trader said. December futures' discount to cash became more pronounced after the October contract expired last Friday, he said.
December closed up 0.175 cent/lb., or 0.22 per cent, at 78.55 cents.
February ended down 0.075 cent, or 0.09 per cent, at 84.575 cents. April settled 0.5 cent lower, or 0.55 per cent, at 89.95 cents.
-- Theopolis Waters
writes for Reuters from Chicago.