Cattle futures jumped to their daily upper limit on Wednesday as cash prices continued to rise.
Tight supplies of cattle and strong demand for beef have sent prices skyrocketing in recent weeks, as packers stock up on red meat ahead of celebrations on Mother's Day and Memorial Day.
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"Beefpackers are having trouble getting enough cattle," said Dan Norcini, an independent livestock trader in Idaho.
Cattle traded on the cash market sold at a considerable premium to previous weeks, with lighter-weight animals creating a supply pinch. The U.S. Department of Agriculture reported sales on Wednesday of $1.45 to $1.46 a pound in southern states, with highs of $1.47 further north.
Packers were able to loosen their purse strings after beef prices prices soared. A pound of wholesale beef rose to $2.32 as of Wednesday morning, compared with $2.07 a little under a month ago.
All this has futures traders pouring into bets that prices will rise further. Live cattle futures for June delivery rose 2.4% to $1.30050 a pound in Wednesday's session at the Chicago Mercantile Exchange, hitting the daily upper limit of the exchange-mandated trading band. Contracts for August delivery also rose limit up.
The momentum from the cattle trade helped carry hog futures, which rose to multimonth highs on Wednesday. CME June lean hog futures closed 1.9% higher at 75.550 cents a pound, the highest close since February 17.
The cattle rally "adds a psychologically bullish spillover into the hog market," said Mr. Norcini.
Pork and hog prices have broken out of a prolonged slump recently, with meatpackers forced to pay more on the cash market as supplies tighten. Hog dealers say they expect a seasonal uptick in demand to boost prices in the weeks to come.
Sentiment in the hog trade "has shifted toward the notion we've seen the low as we head into the summer high-demand season," said Ken Morrison, author of newsletter Morrison on the Markets.
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(END) Dow Jones Newswires
May 03, 2017 15:23 ET (19:23 GMT)