CHICAGO, Ill. (Reuters) — Chicago Mercantile Exchange live cattle futures on Tuesday erased some of Monday’s losses, supported by short-covering in response to strong wholesale beef values, traders said.
April closed up 0.375 cents per pound to 153.575 cents, and June 0.500 cents higher at 145.475 cents.
Tuesday morning’s choice wholesale beef price surged $2.43 per hundredweight from Monday to $247.69. Select cuts jumped $1.24 to $246.30, the U.S. Department of Agriculture said.
“The beef strength is more likely due to the fact that we’re getting closer to post-Easter specials for grilling,” said Oak Investment Group president Joe Ocrant.
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Some grocers are buying beef to avoid a shortage as packers continue to cut back slaughters to shore up their sagging margins.
The day’s beef packer margins were a negative $54.40 per head, compared with a negative $55.50 on Monday and a negative $13.65 per head a week ago, according to Hedgersedge.com.
Uncertainty about how much packers will spend for market-ready or cash cattle this week limited futures’ advances.
Bullish traders said packers bidding for cattle earlier in the week than usual suggests they need supplies.
Market bears contend that kill reductions and poor margins may pressure cash prices.
Processors in Kansas and Texas bid $159 per cwt. for cash cattle versus $163 to $165 prices from sellers, feedlot sources said.
June’s sizable discount to last week’s cash prices stirred bear spreading, a trading strategy in which investors bought that contract and simultaneously sold April.
CME feeder cattle finished lower on back-month live cattle selling and March liquidation before it expires from trading on March 26.
March closed 0.850 cents per lb. lower at 211.575 cents.
CME lean hogs finished mixed, pressured by soft fundamentals while supported by speculative buying, traders said.
April closed down 0.425 cents per lb. to 61.775 cents, and May up 0.650 cents to 72.075 cents.
Tuesday morning’s average cash price in Iowa/Minnesota dipped 18 cents per cwt. from Monday to $59.29, USDA said.
Separate USDA data showed the day’s wholesale pork price dropped 68 cents per cwt. to $67.68 from Monday.
Despite their much-improved margins, packers are reluctant to spend more for hogs given ample inventories and sluggish wholesale pork demand, traders and analysts said.
