Chicago Mercantile Exchange (CME) live cattle futures rose for the fifth consecutive trading session on Wednesday, gaining nearly one per cent to a month high on reduced beef tonnage following winter storms in the U.S. Plains that slashed feedlot cattle weight gains, traders and analysts said.
"They're thinking cash cattle will be higher this week after the two storms. They were bad storms and are very much having an impact," said Jim Clarkson, a broker for A+A Trading Inc.
This week's blizzard that dumped up to 50 cm of wet snow, accompanied by winds approaching 130 km/h, stressed cattle in the huge cattle feeding region of the U.S. High Plains, leading to big weight losses, cattle feeders and livestock experts said on Wednesday.
"The cattle we weighed yesterday were 70 to 100 pounds lighter than they would have been before the storm. There is no question there will be a tremendous amount of tonnage lost over the next month," said Johnny Trotter, president of Bar-G Feedyard at Hereford, Texas, an area hit hard by the blizzards.
Texas Cattle Feeders spokesman Jim Brett Campbell said early reports from its membership indicated 20- to 40-lb. losses on average but more will be known late this week when the cattle showlists are circulated.
CME February live cattle were up 1.275 cents/lb. at 128.55 cents and April was up 0.575 cent at 129.875 cents/lb. (all figures US$).
Support to cattle stemmed not only from the reduced tonnage availabe to the marketplace but from higher wholesale beef markets. U.S. wholesale choice beef was up $1.42 per hundredweight (cwt) at $184.51, and select was up $2.43 at $182.57.
"The beef market was on solid footing with the weight loss and wholesale beef turning up," said Dennis Smith, a broker for Archer Financial.
Feeder cattle turned up in line with the gains in cattle but gains were slowed by an upturn in the Chicago Board of Trade (CBOT) corn market.
CME March feeder cattle were up 0.275 cent at 141.45 cents/lb. and April up 0.35 cent at 144.375 cents/lb.
Gains in cattle futures were restrained on a lack of bullish enthusiasm or momentum even though a government official said the Obama administration may institute a "rolling" furlough to keep meat plants open during automatic budget cuts rather than idle all 8,400 U.S. meat inspectors at the same time.
"Any time there is an uncertainty it limits trade. But they're just not going to let beef plants go idle for two weeks, that would be a disaster and they won't let that happen," Smith said.
"I'm surprised cattle futures aren't up more than they are given the storm out there and the weight loss."
Although the spending cuts are due to take effect on Friday, it could be weeks or months before the meat industry is directly affected. The U.S. Department of Agriculture has not specified a date when furloughs would begin, but says they are unavoidable.
Weak cash hit lean hog futures
CME lean hog futures were lower for the second day in a row and continued to flounder near three-month lows as cash hog markets remained weak, traders said.
"Cash hogs are still very weak and the board is still at a premium to cash," Clarkson said.
Iowa and southern Minnesota cash hogs were steady to weak on Wednesday, and the trend was $1/cwt lower in Indiana, Ohio and Illinois. Packers were well-bought in most areas and full for the week in Illinois. Numbers were tightening in Indiana, and weather distractions were noted in Illinois.
Hog futures also continued to flounder amid concerns about the fate of U.S. pork exports to Russia and China as those countries remain cautious over the industry's use of the additive ractopamine in some feed rations. Russia has banned U.S. meat imports, and China wants pork to be verified ractopamine-free by a third party from March 1.
"Pork has problems. It sounds like we could be losing a couple of big export customers in Russia and China," Smith said.
CME April lean hogs were down 0.575 cent/lb. at 81 cents, and May was down 0.3 cent/lb. at 89.2 cents.
U.S. pork packer margins on Wednesday were a positive 8.15 versus a positive 6.65 on Tuesday and a negative 3.30 a week ago.
Hog futures were nearing technical oversold levels and due for a correction. Based on continuous charts, lean hogs are trading near their lowest level in three months, reaching a session low of 80.950.
The CME lean hog index for the two days ended Feb. 25 was at 81.40, and for the two days ended Feb. 22, it was 82.63.
-- Sam Nelson is a Reuters correspondent covering agricultural futures markets in Chicago.