U.S. livestock: Cattle rally on tightening supplies, strong cash market

Chicago | Reuters — U.S. live cattle futures jumped by as much as two per cent on Monday and feeder cattle futures rose by up to three per cent, propelled by strong cash market prices and tightening supplies of animals, analysts said.

A $2 jump in cash cattle prices at southern Plains feedlot markets late last week fueled buying in futures to open the week, along with robust beef demand and hopes for greater U.S. exports (all figures US$).

After a recent trade deal with top U.S. beef importer Japan, the U.S. Senate may vote on a refreshed regional pact with Mexico and Canada as soon as this week, solidifying access to three of the top five markets for U.S. beef.

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The bullish outlook more than offset concerns about beef packer margins that narrowed to just $12 a head on Monday, from $34.45 a week ago and $171.05 per head a month ago, according to livestock marketing and advisory service HedgersEdge.com LLC.

“The cash market was positive (last week) and it will only get better. We’re now sliding down in supply to the year’s low, which will be in mid-February,” said Rich Nelson, chief strategist with Allendale Inc.

“There’s talk that the strong cow slaughter in recent weeks may give us a lighter supply of calves and feeders in future months,” he said.

Chicago Mercantile Exchange (CME) February live cattle futures jumped 2.55 cents to 127.275 cents/lb., breaking through technical chart resistance at its 20- and 50-day moving averages and ending at a three-week high. The contract’s two per cent gain was the strongest in nearly four months.

Actively traded March feeder cattle climbed 3.675 cents to 146.35 cents/lb., a 2.6 per cent jump that was the strongest in almost five months. The May through November contracts posted new all-time highs during the session.

CME lean hog futures ended mixed on Monday, anchored by concerns about the pace of pork purchases by China to date.

The United States and China are due to sign a Phase One trade deal next week that U.S. officials say will sharply increase Chinese imports of U.S. farm goods.

Most actively traded February lean hog futures ended up 0.075 cent at 68.625 cents/lb. after tumbling by the daily three-cent limit on Friday. April hogs shed 0.2 cent to close at 74.95 cents.

— Karl Plume reports on agriculture and ag commodities for Reuters from Chicago.

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