CHICAGO, May 4 (Reuters) – Chicago Mercantile Exchange live cattle closed higher on Monday, shrugging off Friday’s weakness, helped by short-covering following the turnaround in wholesale beef prices, traders said.
Monday morning’s choice wholesale beef price rose $1.70 per hundredweight (cwt) from Friday to $256.34 per cwt. Select cuts climbed $1.94 to $245.16, the U.S. Department of Agriculture said.
Speculative buyers were drawn to CME live cattle futures that remained undervalued based on last week’s cash prices.
Last week, packers paid mostly $160 to $163 per cwt for market-ready, or cash, cattle in the U.S. Plains, which was as much as $3 higher than the prior week, according to industry sources.
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Packers needed cattle to fill out pre-booked meat orders for the upcoming Mother’s Day weekend and the U.S. Memorial Day holiday in late May, said JRS Consulting owner Jack Salzsieder.
June futures gained further traction after it rolled through the 20-day and 40-day moving averages, which stirred fund buying.
June ended 1.550 cents per lb higher at 150.725 cents per lb, and above the 40-day moving average of 150.03 cents. August closed at 149.125 cents per lb, up 1.300 cents.
HOG FUTURES ENDED STRONGER
CME lean hogs gained for the seventh time in eight sessions, driven by still higher cash prices amid tight supplies, traders said.
May closed 0.925 cents per lb higher at 76.925 cents, and June up 0.575 cent to 81.825 cents.
The morning’s average hog price in Iowa/Minnesota was up 85 cents per cwt to $75.78 from Friday, the USDA said.
Packers on Monday processed 425,000 hogs, down 4,000 from a week ago, based on USDA estimates.
“They’re calling for rain for the rest of the week, so maybe we’ll get some farmers to stop working in the fields to sell a few more pigs,” a Midwest hog dealer said.
The prospect of additional supplies in pockets of the Midwest, and the possibility that some packers may curtail production to recoup lost margins, may soon weigh on cash prices, dealers said.
Monday’s pork packer margins were a negative $9.40 per head, compared with a negative $8.85 on Friday and a positive $3.65 a week ago, according to Colorado-based analytics firm Hedgersedge.com.
