CHICAGO, Feb 25 (Reuters) – Chicago Mercantile Exchange live cattle contracts climbed on Thursday, propelled by anticipation of firm cash prices by Friday amid improved wholesale beef demand, traders said.
The February contract, which will expire on Monday, closed up 0.900 cent per lb to 137.875 cents. April ended 1.200 cents higher at 137.350 cents.
The morning’s wholesale choice beef price, or cutout, rose 98 cents per cwt from Wednesday to $217.72. Select cuts gained 72 cents to $214.44, the U.S. Department of Agriculture said.
“We expected the cutout to rally into Tuesday or so of next week, which might be somewhat optimistic. We have to keep in mind extreme competition from other meat proteins waiting on the other end of this thing,” said Allendale Inc chief strategist Rich Nelson.
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Beef’s seasonal turnaround, about 13,000 fewer cattle for sale and future’s recent rally imply at least $134 per cwt prices for market-ready, or cash, cattle by Friday, said traders and analysts.
“Beef cutout’s strong performance worked wonders for packer margins, yet another reason for potential cash strength,” a trader said.
Thursday’s average beef packer margin was a negative $22.65 per head, up from a negative $24.35 on Wednesday and negative $39.20 a week ago, as calculated by HedgersEdge.com.
Weak corn futures and live cattle market advances lifted CME feeder cattle contracts. March closed 1.150 cents per lb higher at 159.100.
Profit taking and sentiments that cash hog prices may be about to top out weakened CME lean hogs, traders said.
April closed 0.350 cent per lb lower at 71.125 cents, and May finished down 0.125 cent per lb to 77.100.
Weather and maintenance-related issues significantly reduced Thursday’s hog slaughter, and may have backed up animals on farms that could pressure near-term cash prices, traders and analysts said.
On Thursday, packers processed 388,000 hogs, down from 437,000 a week ago, according to USDA estimates.
Analysts and Midwest hog dealers projected a roughly 100,000-head Saturday kill, including plants making up midweek downtime.
Thursday morning’s average cash hog price in Iowa/Minnesota slipped 25 cents per cwt in light volume from Wednesday to $63.96 cents, the USDA said.
