Chicago | Reuters — Live cattle futures rose to life-of-contract highs at the Chicago Mercantile Exchange on Tuesday, lifted by worries that severe winter weather could prompt beef packers to pay higher prices for animals in the U.S. Plains, traders said.
Technical buying and short-covering also buoyed cattle prices while lean hog futures finished narrowly mixed as some contracts were pressured by technical selling.
CME February live cattle settled up 1.525 cents at 126.95 cents/lb. after touching a contract peak of 127.1 (all figures US$). The April contract hit a contract high of 127.65 cents before finishing at 127.425, up 0.75 cent.
The five-session roll for investment funds tracking Standard + Poor’s Goldman Sachs Commodity Index had wrapped up after Monday’s session and some investors were caught short on Tuesday when prices climbed. That prompted even further gains as shorts were forced to buy back contracts.
“You definitely saw a short squeeze in the front,” S+P Global Platts Analytics analyst Peter Meyer said of cattle futures.
Heavy snow and cold temperatures were forecast later this week in the Plains cattle belt, which could impede transportation of animals and slow weight gains — potentially forcing packers to boost bids to ensure timely deliveries.
“I think biggest driver in cattle right now is weather,” one independent livestock futures trader said.
CME March feeder cattle were up 0.35 cent, to 144.75 cents/lb., rising from a roughly one-week low touched on Monday. Feeder cattle were supported in part by a drop in corn futures as cheaper feed cuts costs for fattening cattle and can boost demand for cattle.
In the hog market, the February contract climbed 0.3 cent, to 62.15 cents/lb., rebounding after declining the previous two sessions. However, other hog contracts including June futures were narrowly lower.
Traders continued to balance conflicting factors of ample U.S. hog supplies and expectations for increased U.S. pork exports to China later this year.
China, the world’s largest hog producer and pork consumer, has culled 916,000 pigs after around 100 outbreaks of African swine fever in the country, the agriculture ministry said as the disease continues to spread to new regions and larger farms.
— Michael Hirtzer reports on commodity markets for Reuters from Chicago.