Livestock Futures Extend Gains as Cattle Hit Upper Limit

By Benjamin Parkin Features Dow Jones Newswires

Cattle futures surged to their expanded upper limit on Thursday as tight supplies fuel a steep run-up in prices.

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Futures closed slightly lower than their latest intraday peak but still extended the month-long rally. Weeks of high prices on the cash market have encouraged feed yards to sell cattle at lighter weights than usual, which has created a supply pinch.

"It may not top for a month," said Trey Warnock, an analyst at Amarillo Brokerage in Texas. "We would typically look for cattle to decline into the summer. We're very contra-seasonal now."

Packers surprised observers on Wednesday by paying between $1.45 and $1.47 a pound for cattle in the day's trade. That gave futures traders incentive to push contracts for near-term delivery even higher to close the gap.

Live cattle futures for June delivery rose 4.5 cents to $1.3455 a pound at Thursday's opening on the Chicago Mercantile Exchange, hitting the exchange-mandated daily limit for the third consecutive day, before closing 1.25 cents higher at $1.31300 a pound.

Wholesale beef rose 1.25 cents to $2.34 a pound on Thursday morning, with Americans preparing to fire up grills on upcoming holidays like Memorial Day.

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But futures contracts for delivery in October and December declined on suspicions that tight supplies would soon ease as heavier cattle matured for slaughter. Traders also sold feeder cattle contracts on the belief that prices would soon peak.

A fresher rally in hog prices continued to gather pace. CME June lean hog futures added 0.925 cent to close at 76.475 cents a pound, while cash prices rose to a five-day average of $63.98 on Thursday morning.

The hog chart "is beginning to resemble cattle of the past few weeks," said Ken Morrison, author of newsletter Morrison on the Markets, in a note. "No sign of a top there as long as cash is holding up."

Traders anticipate that hog futures will continue high throughout much of the summer on tighter supplies, even while cattle prices ease. CME July and August lean hog futures are trading at similar levels to the June contract.

Write to Benjamin Parkin at benjamin.parkin@wsj.com

(END) Dow Jones Newswires

May 04, 2017 15:03 ET (19:03 GMT)