Deferred cattle hit contract highs on spreading, fund buying

CHICAGO, March 20 (Reuters) – Chicago Mercantile Exchange cattle futures were mostly higher on Monday, with deferred months for both live and feeder cattle hitting contract highs on spreading and investment fund buying, traders and analysts said.

Lean hog futures were largely lower, extending losses to the fourth straight session in a technical selloff.

Most-active CME April live cattle settled 0.425 cent lower at 118.900 cents per pound, while all other months gained and the October 2017 through April 2018 contracts hit life-of-contract highs.

Investors were buying the deferred contracts on expectations for further gains, said Altin Kalo, analyst at Steiner Consulting Group. “You look at the back months and they start to look a little bit cheap,” Kalo said.

CME April feeder cattle gained 0.825 cent to 132.450 cents per pound, after climbing to 133.700 cents, the highest since August. Feeder cattle contracts from August 2017 through January 2018 hit lifetime highs.

Gains in beef prices have buoyed the cattle market in recent weeks. The U.S. Department of Agriculture earlier said choice-grade wholesale beef eased 33 cents to $223.10 per cwt, still near the highest levels in about nine months.     

Investors this week also were taking positions ahead of USDA’s monthly Cattle on Feed report due on Friday. Preliminary estimates indicated the number of cattle on feed in February could be slightly lower than the 1.710 million head placed in the same month last year, suggesting slightly smaller numbers coming out of feedlots later this year.

Traders were awaiting direction in U.S. Plains cash cattle markets. Deals last week of $128 per cwt were up $3. Feedlots were offering about 9,000 more cattle for sale this week, said Allendale Inc analyst Peter Adams, who added that he was bearish on cattle prices.

Adams and others said the Brazilian meat company corruption scandal has had little effect on U.S. meat or livestock prices. China suspended imports of Brazilian meat after police accused Brazilian companies of paying off inspectors to hide unsanitary conditions. China does not buy much beef from the United States.

CME April lean hog futures were down 0.400 cent to 68.650 cents per pound, a one-week low.

Cash hogs at midday in the top market of Iowa and southern Minnesota were 2 cents lower at $66.05 per cwt, according to USDA.

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