CHICAGO, April 7 (Reuters) – Chicago Mercantile Exchange live cattle rose for a third straight day on Friday with support from fund buying and futures’ discounts to late-afternoon cash price expectations, said traders.
They said some market participants sold April futures and simultaneously bought deferred months in a trading strategy known as bear spreading.
April live cattle closed 1.250 cents per pound higher at 120.050 cents, and above where the 10- and 20-day moving averages converged at 119.667 cents. June ended 1.675 cents higher at 111.800 cents, and above the 10-day moving average of 110.800 cents.
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Fundamental market traders are reluctant to sell futures because of their discounts to cash prices, which recently declined but not sharply, said Oak Investment Group President Joe Ocrant.
Investors expect unprofitable packer margins, seasonally slow wholesale beef demand and more than 30,000 cattle more for sale than last week to undercut cash returns.
Scheduled maintenance idled two processors on Friday, limiting their need for supplies.
Packer bids for slaughter-ready, or cash, cattle in the U.S. Plains ranged from $122 to $124 per cwt versus up to $130 asking prices, said feedlot sources. Most cash cattle last week brought $128 to $130.
Friday morning’s average wholesale beef price slipped 25 cents per cwt to $207.65 from Thursday. Select cuts dropped $1.24 to $199.04, the U.S. Department of Agriculture said.
Technical buying and live cattle futures gains boosted CME feeder cattle.
April feeder cattle closed 1.800 cents per pound higher at 133.750 cents.
CME lean hogs hit a three-month low as abundant seasonal supplies continued to pressure cash prices, said traders.
They said bargain hunting and bear spreading limited deferred-month losses.
April hogs ended 0.600 cent per pound lower at 63.325 cents, and May down 0.550 cent to 69.000 cents.
Friday morning’s U.S. Midwest cash hog prices were steady to $1 per cwt lower, according to regional hog merchants.
The USDA estimated this week’s hog slaughter at 2.306 million head, 147,000 more than a year ago.
Despite abundant hogs, packers may curtail this Saturday’s kill in anticipation of tepid wholesale pork demand until after Lent, Midwest hog merchants said.
They attributed heavier pigs this week to warmer spring weather that is conducive for weight gains.
“I don’t think farmers are holding back hogs as much as pigs are getting bigger because we’re getting into nicer weather,” an Indiana hog dealer said.
