U.S. live cattle futures gained modestly Wednesday as investors brought the market closer in line cash cattle price expectations after a volatile day of trading, analysts and traders said.
Chicago Mercantile Exchange live cattle spot December closed up 0.025 cent per pound to 126.15 cents. February ended at 130.525 cent, a gain of 0.375 cent (all figures US$).
"The market was all over the place. People were trying to figure out what cash is going to do, beef prices came down this morning and the stock market went up," a trader said.
Live cattle futures buyers welcomed the rally on Wall Street because of its implications for demand for various household items, including expensive cuts of meat.
Packer bids for cattle in Kansas and Nebraska were at $123 per hundredweight (cwt) against $126 to $127 asking prices, said feedlot sources. No bids were reported in Texas where cattle are priced at $128, they said.
Processors may avoid spending more for cattle given there are 40,000 more of them available for sale this week.
And packers have built up inventories through pre-negotiated sales, allowing them to buy fewer cattle on the open market while improving their margins.
HedgersEdge.com put beef packer margins for Wednesday at a negative $58 per head, compared with a negative $67.55 on Tuesday and a negative $70.45 for Nov. 28.
The U.S. Department of Agriculture's Wednesday morning wholesale price data showed choice beef at $194.60/cwt, down 45 cents from Tuesday, and select cuts fell 98 cents to $175.54.
CME January feeder cattle climbed with modest live cattle market gains, strong cash feeder cattle values and chart-related buying.
January closed 0.825 cent per pound higher at 146.4 cents. March finished at 149.05 cents, rising 0.775 cent.
Hog futures climbed as buyers had bet that packers would raise bids for cash hogs at least one more day while booking animals for remainder of this week's slaughter.
But cash hog prices in the most-watched Iowa/Minnesota market took a huge spill on Wednesday morning, tumbling $6.74/cwt from Tuesday to $78.87 and after being up 10 days in a row.
Still, most futures investors await the government's evening cash hog data that involves a larger sampling of packers.
"Traders are conflicted about cash prices," said R.J. O'Brien hog futures trader Tom Cawthorne.
Some argue that supplies are tight, based on lighter hog weights than a year ago while others believe cash could suffer as packer margins fade, he said.
USDA's weekly average weight data showed hogs in the Iowa/southern Minnesota market last week at 275.2 lbs., up 0.8 lb. from the week before and down one pound from the same period a year ago.
Pork packer margins for Wednesday were at a negative $5.05 per head, compared with a negative $1.80 on Tuesday and a positive $6.40 for Nov. 28, according to HedgersEdge.com.
Spot December hogs settled at 85 cents/lb., 0.55 cent higher. February finished up 0.125 cent to 85.65 cents.
-- Theopolis Waters writes for Reuters from Chicago.