Cattle futures rose for a fifth consecutive session on Thursday.
Traders were betting that physical cattle prices would be steady or rise this week, after falling at the beginning of 2018. Market observers said that showlists of slaughter-ready cattle were smaller this week, which could force meatpackers to pay more.
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Packers paid $119.75 per 100 pounds for around 100 head of cattle at the online Fed Cattle Exchange auction on Wednesday, which can help determine a price direction for the week. That was in line with last week's average price, and analysts said packers followed up by bidding steady money again on Thursday.
Cattle futures responded to that trade by rallying to their upper daily limit on Wednesday. February-dated live cattle contracts on Thursday rose a further 0.8% to $1.2195 a pound at the Chicago Mercantile Exchange, approaching a high for the new year. Traders said chart signals suggested to some that prices were headed higher, sparking further buying interest.
Hog futures, meanwhile, turned higher. CME February lean hog contracts rose 0.5% to 73.05 cents a pound, reclaiming some losses from Wednesday.
The cash market for hogs was also steadying, though that came on the back of a multiweek rally. Several bouts of cold weather in the central U.S. had slowed the rate at which hogs fatten, curbing supply of slaughter-ready pigs.
The squeeze took a toll on processing margins, as packers were forced to pay more in order to secure hogs for their plants. Market observers said some packers were choosing to ease off, slaughtering fewer hogs in order to help rebuild their margins. That would weigh down the cash market in the near term, they said.
"Confusion is apparent," said Dennis Smith, a broker at Archer Financial Services.
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(END) Dow Jones Newswires
January 18, 2018 15:20 ET (20:20 GMT)