CHICAGO, Dec 16 (Reuters) – Chicago Mercantile Exchange live cattle futures on Friday reached their highest level since late August, driven by short-covering following the morning’s strong wholesale beef prices, said traders.
Buy stops and technical buying enhanced market advances, they said.
December live cattle closed 1.600 cents per pound higher to 112.325 cents, after breaking through the 200-day moving average of 111.614 cents. February ended 2.075 cents to 115.350 cents.
Friday morning’s choice wholesale beef price was $1.31 per cwt higher than on Thursday at $194.77. Select cuts climbed $2.16 to $180.70, the U.S. Department of Agriculture said.
Grocers stocked on beef after some packers cut slaughters, which grew their margins and beef cutout values, said traders and analysts.
Market bulls believe much-improved packer profits and beef demand will support cash prices later on Friday. They also point to a wintry mix in the Plains that could disrupt livestock production.
“Cold weather don’t hurt them (cattle) at all, it’s the wet weather that hurts them,” said KIS Futures vice president Lane Broadbent.
Cattle use a lot of energy to keep warm and muddy feedlots create problems for animals as they try to move around or lie down, he said.
Contrarians foresee weaker cash returns based on more cattle for sale this week and some packers scaling back production before plants close over the Christmas and New Year’s holidays.
Some bids for slaughter-ready, or cash, cattle in the U.S. Plains are up to $112 per cwt versus as much as $115 asking prices, said feedlot sources. Last week, cash cattle brought $109 to $112.
Live cattle futures buying lifted CME feeder cattle to a 3-1/2 month top. January feeders closed 2.200 cents per pound higher at 129.900 cents.
Spillover support from CME’s live cattle markets contributed to five-month highs in some of the exchange’s hog contracts, said traders.
They said February futures led advances after investors bought that contract and simultaneously sold deferred months in a trading strategy known as bull spreads.
February ended 2.300 cents per pound higher at 64.700 cents, and April closed 0.825 cent higher at 68.300 cents.
Some market participants sat out Friday’s session as they awaited subsequent cash and wholesale pork price direction.
Harsh weather in the country may snarl transportation of livestock to market, a trader said. But heavy snow and bitter cold on the East Coast might hurt meat demand, he added.