Cattle Futures Hit Six-Week High

By Benjamin Parkin Features Dow Jones Newswires

Cattle futures touched their upper daily limit on Wednesday, hitting a six-week high as cash-market prices rose.

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Meatpackers bought 636 head of cattle at the weekly online Fed Cattle Exchange on Wednesday morning for an average of $106.67 per 100 pounds, up from $104.75 last week. That was also higher than last week's total cash trade average of $105.84, according to the U.S. Department of Agriculture.

Traders were betting that cash prices would continue rising in follow-up trade this week, cementing a seasonal turnaround as supplies of slaughter-ready cattle ease. Analysts expect the USDA to show the rate of cattle placed in feedlots for fattening to fall from a year earlier in a monthly report on Friday. That would be an indication of tighter supplies in the coming months.

Analysts said cattle futures found added buying interest on Wednesday after breaking through technical support levels.

"We got a buy signal and the technicals supported it," said Lon Malmkar, a broker at FuturesOne in Lincoln, Neb. "The market decided that it was time to go the other direction."

October live cattle futures rose 2.8% to $1.1095 a pound at the Chicago Mercantile Exchange, popping through a technical ceiling of $1.10 to close at the highest point since Aug. 8. CME September feeder cattle futures rose 1.6% to $1.53975 a pound, a two-month high.

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Hog futures were mixed. The front-month October contract tumbled 2.5% to 58.65 cents a pound while the deferred December and February contracts rose.

Analysts said the divergence between near-month and later-month futures came amid a negative short-term outlook for slaughter-ready hog prices. Meatpackers have paid lower cash prices every day since Sept.1, with bids also expected lower on Wednesday.

Traders were betting that cash prices would rebound later this year, however. A rise in processing capacity, as a number of new slaughter houses open, could lift prices as packers pay more to secure supply for the new facilities.

"Cash has got to stop going down before most people decide to get long," Mr. Malmkar said.

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

(END) Dow Jones Newswires

September 20, 2017 15:04 ET (19:04 GMT)