Chicago | Reuters — Live cattle futures on the Chicago Mercantile Exchange closed higher on Tuesday on expectations of firmer cash prices as supplies of market-ready cattle tighten, following a drop this past spring in the number of cattle placed in feedlots, traders said.
“Packer margins are huge; they are still over $350 a head. So I think the feedlots could pay up more,” said Don Roose, president of Iowa-based U.S. Commodities (all figures US$).
Others cautioned, however, that demand for market-ready cattle from meat packing plants may be limited by heavy cattle weights that have bolstered beef production and slower line speeds due to measures aimed at reducing the spread of the coronavirus among workers.
Still, cattle markets tend to firm in the fall, Roose noted.
“Seasonally, we are coming into that time frame where the technicals are starting to look more positive,” Roose said.
CME October live cattle futures settled up 1.325 cents on Tuesday at 105.775 cents/lb. October feeder cattle futures ended up 1.35 cents at 139.85 cents/lb.
Lean hog futures closed modestly higher, following strength in cattle futures. But the market looks technically overbought following strong advances last week and during much of August, Roose said.
CME October lean hogs settled up 0.075 cent Tuesday at 59.9 cents/lb., but stayed below Friday’s four-month high of 60.95 cents.
Chinese demand for pork continues to underpin the market, although Roose said traders were closely monitoring export data to gauge how quickly China can rebuild its hog herd after African swine fever killed millions of pigs in the country in 2018 and 2019.
— Julie Ingwersen is a Reuters commodities correspondent from Chicago.