Cattle futures rebounded on Wednesday as wholesale beef prices rose to a six-week high.
Wholesale beef rose $2.82 to $196.78 per 100 pounds on Tuesday, the U.S. Department of Agriculture said, the highest point since mid-August. Beef prices were lower at midday Wednesday, however.
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Traders are betting that beef prices are bottoming, as demand picks up in the fourth quarter. With processing margins already hovering around $150 a head for much of September, traders say rising beef prices will give packers more flexibility to spend on the cash market for slaughter-ready cattle.
"Cutouts are higher the last several days, that gives traders ideas that cash trade could be firmer on better packer demand," said Brian Hoops, president of brokerage Midwest Market Solutions.
That helped end two days of losses after the USDA said in a report late last week that cattle placements in feedyards in August rose well above prereport estimates, suggesting that cash-market cattle supplies will increase early next year. That prompted a correction in the futures market as traders adjusted their expectations.
October live cattle futures rose 0.3% to $1.08575 a pound at the Chicago Mercantile Exchange, with the most-active December contract climbing further yet.
This week's cash trade got off to a slow start after feedyards didn't sell any cattle at the online Fed Cattle Exchange auction, passing up offers of $107.50 per 100 pounds from meatpackers. Before the auction, packers were bidding $104 in southern states. Feeders asked for $110 to $111.
Last week, cash prices rose to a high of $109 on Friday. Some analysts expect to see continued strength this week.
Hog futures were also higher. Wholesale pork prices rose at midday despite falling on Tuesday, while cash prices fell less than expected.
Traders were positioning ahead of the quarterly hogs and pigs report due Thursday afternoon. Analysts expect to see national hog inventories as of September 1 rising by two to three percentage points, with a similar-sized increase in the marketing herd and a smaller increase in herds kept for breeding.
CME October lean hog futures rose 0.3% to 55.4 cents a pound. December contracts rose 2.7% to 59.65 cents.
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(END) Dow Jones Newswires
September 27, 2017 15:25 ET (19:25 GMT)