Cattle Futures Charge to 7-Week High


  • U.S. cattle supply drives gains in futures
  • Feeder cattle post biggest livestock gains
  • Strong cash markets lift hogs By Bob Burgdorfer CHICAGO,

June 20 (Reuters) – U.S. cattle futures bounded to a seven-week high early on Monday after a government report on Friday showed a smaller-than-expected feedlot cattle supply.

Volume-leader August cattle has increased nearly 7 percent since last Wednesday, which has some analysts concerned about its ability to advance much more as beef sales should slow after the U.S. Independence Day holiday on July 4.

Hogs advanced, pushed higher by a near $3 jump in the closely watched Iowa/Minnesota cash market on Friday, as investors are betting a seasonal drop in hog numbers will keep cash going up.

In cattle, Monday’s gains were in line with the forecasts that followed Friday’s report. The report showed 4 percent more cattle feedlots on June 1 than a year ago, while analysts, on average, expected 5.4 percent more. Also, that June 1 supply was down 2.5 percent from a month earlier.

“The news is fine, but this rally is huge,” said Bob Short, analyst at PFG Best, who worries the futures market may be running out of steam.

If futures finish higher on Monday and August can move through chart resistance near 112.70 cents, then 115 to 116 cents is possible, said Short.

Friday’s report was the first hard evidence that cattle supplies are coming down. For months analysts had expected a decline but numbers stayed high as cattle from Mexico and from the drought-damaged pastures in the southwest kept flowing into feedlots.

“I think our bias for the next two weeks should still be up, but we’ve had the big gains,” Rich Nelson, analyst with Allendale Inc, said of the cattle.

After those two weeks beef demand should slow, which it typical does during the hottest period of summer.

“We are doing this last minute buying for the Fourth of July. It is a wasteland after July 4 in terms of demand,” Nelson said of beef sales. 

Cash cattle markets were quiet on Monday but analysts and feedlots expect at least $1 higher sales this week of $110 per cwt or more. The June futures currently reflect at $111.8 per cwt market.

At 11:30 a.m. CDT (1630 GMT), June cattle LCM1 were 1.800 cents, or 1.64 percent, at 111.550 cents per lb and August LCQ1 was up 1.600 cents, or 1.45 percent, at 111.800 cents per lb.

Feeder cattle had the biggest gains of the day in the livestock sector, lifted by the higher cattle and by the outlook for smaller supplies and higher cash prices.

Monday’s gains in feeders follow a 7.3-percent gain last week. That was the largest weekly gain since 10.7 percent during the week of May 5, 1996.

On Monday morning, August feeders 2FCQ1 were 2.900 cents, or 2.2 percent, at 135.550 cents and September 2FCU1 was up the 3.00-cent limit, or 2.25 percent, at 136.575.

Hog futures had solid gains on Monday, lifted by last week’s higher cash markets and by prospects for higher cash this week as hog supplies decrease, traders said.

“Even though they have negative margins, packers are bidding up for hogs because of increased retail busies and tight hog numbers,” said Tom Cawthorne, CME hog trader with R.J. O’Brien.

Supermarkets also are buying pork for U.S Independence Day promotions.

In midday trading, CME July hogs LHN1 were 1.675 cents, or 1.75 per cent, at 97.325 cents per lb and August hogs 2LHQ1 up 1.400 cents, or 1.48 percent, at 96.250.

(Additional reporting by Theopolis Waters;editing by Sofina Mirza-Reid)

Source:  Reuters

Posted by Haylie Shipp


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