Monday September 15, 2014




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U.S. cattle futures gain, hog futures firm

Fiscal crisis jitters restrain trade

U.S. cattle futures rose Friday over improved optimism that lawmakers would work through budget differences and traders awaited the U.S. Department of Agriculture's October cattle-on-feed report.

Livestock futures also have been finding support from declining Chicago (CBOT) corn and soymeal, which will lower feed costs. Corn turned firm late on Friday but is still down nearly 15 per cent from the record $8.49 per bushel set in August. Soymeal is down more than 20 per cent from the record $541.80 per ton set in early September (all figures US$).

"We're seeing a lot of positioning before the cattle-on-feed report, and the break in grains is supportive as well," said Dax Wedemeyer, analyst for U.S. Commodities at Des Moines, Iowa.

Traders said livestock futures turned higher after equities recovered after news from Washington that the United States may be able to avert automatic tax hikes and spending cuts in January that could send the country back into recession.

Chicago Mercantile Exchange (CME) December cattle were up 0.55 cent per pound at 126.150 cents; February was up 0.65 at 130.025.

Feeder cattle for January delivery were up 0.45 at 145.6, and March feeders were up 0.525 at 148.125.

Corn prices rose in late dealings on Friday but overall, the decline in price of the chief feedgrain has helped lift feeder cattle and also led to a reversal of bear spreads in live cattle futures, which buoyed the nearby December contract relative to the deferred months.

Livestock analysts were expecting the USDA cattle report for October to show the lowest number of young cattle placed in the nation's feedlots in 16 years, and the number on feed at the end of October down more than five per cent from a year ago.

Poor profits, due in part to high feed costs, have been trimming the number of cattle placed on feed for five months in a row, and the nation's cattle herd has shrunk to the smallest in 60 years.

Traders said the CME December cattle contract was pricing in cash cattle at the $125 per hundredweight level, and that price appeared to be the benchmark ahead of the weekend.

However, additional support to cattle futures came from news feedlot sources late on Friday said fed cattle in Texas traded lightly at $126/cwt, steady with last week.

Updated beef export data were bearish for cattle futures. USDA on Friday reported last week's U.S. beef exports down 42 per cent from the previous week and down 30 per cent from the prior four-week average. Exports were the lowest since the week of Sept. 27.

Lean hog futures were mixed, with nearby months firm on the lower corn prices and on the discount of December hog futures to cash. Demand was restrained since packing plants will be closed during the Nov. 22 U.S. Thanksgiving Day holiday, limiting packer needs for supplies.

Traders and analysts also said activity in hog futures was being somewhat restrained by the possibility of a fiscal crisis.

Wedemeyer said there "is some wait-and-see" and "if nothing is done, it will be bearish for all commodities."

CME December lean hogs were up 0.25 cent/lb. at 80.325 cents; February was up 0.3 at 86.45.

-- Sam Nelson reports on the Chicago futures markets for Reuters.



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