CME cattle futures extend climb on robust packer margins

By Julie Ingwersen

CHICAGO, Aug 22 (Reuters) - Chicago Mercantile Exchange live cattle futures advanced for a fourth straight session on Thursday, led by the nearby August contract as robust profit margins for beef packers fueled expectations of strong demand for cash cattle, traders said.

"Packers are just raking it in, so the incentive is there to ramp up the kills," said Tim Hackbarth, analyst with Top Third Ag Marketing in Chicago.

Demand for beef from retailers ahead of the Labor Day holiday has helped buoy packer margins. But some traders cautioned that the rally may be fading. They noted that deferred cattle futures, including the most-active October contract, trailed the gains in the thinly traded front contract, which expires on Aug. 30.

CME August live cattle futures settled up 2.300 cents at 104.975 cents per pound, while October live cattle ended up 0.875 cent at 101.100 cents per pound.

October feeder cattle settled up 0.925 cent at 135.475 cents per pound.

"The packers are expected to go ahead and stretch and get some cattle this week ... (but) the Labor Day buying is going to be done soon. Once that buying is done, the beef is going to roll over because it's so high-priced," said Dan Norcini, an independent livestock trader.

The U.S. Department of Agriculture (USDA) on Thursday quoted choice boxed beef cutout <BEEF-US-CH> at $239.28 per cwt, down $2.46 from Wednesday's two-year peak. Select cutout rose 21 cents to $215.91.

In contrast to cattle, CME lean hog futures slipped for a second day on plentiful hog and pork supplies.

Cash hog prices in the closely watched Iowa and southern Minnesota market fell $2.65 on Thursday, and the pork cutout fell $1.30, according to the USDA.

Meanwhile, weekly export sales of U.S. pork for the week ended Aug. 15 totaled 18,500 tonnes, down 9% from the previous week, and included no major sales to China.

"We know we have this big supply of pork coming. And the demand is just not keeping up, without those strong export markets," Norcini said.

CME October hogs settled down 1 cent at 62.300 cents per pound.

(Reporting by Julie Ingwersen Editing by Leslie Adler)

2019-08-23 01:18:11

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