U.S. livestock futures closed with modest gains Wednesday as traders questioned whether fundamentals underpinned the previous day's rally. The front-month live cattle future ended narrowly lower, shedding early gains as a debate continued over whether latent cash buying might drive the market higher in the traditionally quiet week before the new year.
Most lean hog contracts also ended narrowly lower after losing early gains. Live cattle has been the focus for the debate between bulls and bears, and the February contract--the most heavily traded--ended 0.475 cents lower at $1.21 a pound. Other contracts made modest gains.
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Last week's government supply and demand reports had been broadly bearish, but analysts were split on the impact of cold weather, which crimps animal weights but can also limit consumer buying.
"February cattle's breakout rally in the wake of what was an ostensibly bearish Cattle on Feed report suggests that the market is rejecting its recent lows and could be on course for a correction," said analyst Dan Hueber.
Wednesday's estimated slaughter of 118,000 cattle and 464,000 hogs was marginally higher than last year.
Box prices moved slightly higher to support futures, but even with market reports of supermarket interest, cash buyers have remained on the sidelines awaiting a dip in contract values. There's been no cash trading so far this week and zero sales at a weekly online auction that featured 637 head. It's the first auction in three weeks to register no sales, with potential buyers balking at asking prices around $1.22 a pound. Most of last week's live sales were around the $1.20 mark.
Demand had looked tighter in hogs, but futures ended two sessions of gains with narrow losses across the complex. The February contract shed much of Tuesday's advance, ending down 0.5 cents at 71.025 cents a pound.
(END) Dow Jones Newswires
December 27, 2017 15:27 ET (20:27 GMT)