Cattle Futures Rally on Steadying Cash Trade
Cattle futures leaped just short of a two-week high as physical-cattle prices showed signs of stabilizing.
Cash prices for slaughter-ready cattle have trended lower in 2018. But meatpackers at a closely watched online auction Wednesday morning paid steady money from a week earlier, suggesting to some traders that prices were bottoming.
Packers at the Fed Cattle Exchange auction bought a little over 100 head of cattle from Texas, around a third of what was listed for sale, at $119.75 per 100 pounds. Cash sales over the course of last week averaged $119.94 on a live basis, according to the U.S. Department of Agriculture.
That helped spark buying interest in cattle futures on Wednesday, analysts said, pushing the market higher for a fourth consecutive session. Live cattle futures for February-delivery rose 2.4% to $1.20975 a pound at the Chicago Mercantile Exchange, touching its upper limit for the session. That was the highest close since Jan. 4.
The cattle market picked up steam during Wednesday's session as traders interpreted chart patterns as suggesting that prices were headed higher. Market participants were buying cattle while selling hogs, said Mike Zuzolo of Global Commodity Analytics & Consulting, after the hog market rallied on Tuesday.
CME February lean hog contracts slid 1.6% to 72.725 cents a pound, falling from Tuesday's multimonth highs.
The cash market for physical hogs was cooling after several consecutive weeks of gains, analysts said. Cash prices for hogs fell on Tuesday by 12 cents to $69.71 per 100 pounds, and were expected steady on Wednesday.
Higher cash prices were eating into meatpacker margins. The standard operating margin for a pork packer has more than halved in 2018, according to the WSJ index, to less than $15 a head.
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(END) Dow Jones Newswires
January 17, 2018 15:25 ET (20:25 GMT)