By Benjamin Parkin
Cattle futures resumed their upward course, closing at the highest point in eight months.
Traders expect cash prices for physical cattle to rise this week, betting that a short-term supply squeeze will force meatpackers to raise their bids if they want to secure inventory for their plants.
But signs of rising cash prices were limited. Meatpackers didn't buy any cattle at the online Fed Cattle Exchange auction on Wednesday morning, which sometimes serves as a barometer for the week's price direction. Last week, cash sales averaged $126 per 100 pounds on a live basis. Observers said packers were bidding around $124 to $126 this week, while feedyards asked for around $130.
Troy Vetterkind, owner of Vetterkind Cattle Brokerage in Thorp, Wis., said that packers would likely try to delay cash trade until later in the week, in the hopes that a drop in futures would give them more bargaining power.
"Packers are probably going to try and play this out as long as they can this week," Mr. Vetterkind said, "and use a break to buy cattle at steady money."
Live cattle futures for February delivery rose 0.7% to $1.2765 a pound at the Chicago Mercantile Exchange, the highest close since June 12. The more active April contract also rose, as did futures for feeder cattle.
Analysts said tightness in the slaughter-ready cattle supply was unlikely to last more than a few weeks. Recent government data showed that feedyard operators were placing more cattle than expected in lots for fattening. Many of those animals would reach their requisite slaughter weights in the spring.
Hog futures also bounced, despite weakness in the cash market. Average physical hog prices fell $1.13 on Tuesday to $67.78 per 100 pounds, and observers said they expected packers to bid mostly $1 less again on Wednesday.
But some analysts said the futures market had fallen too far in recent days, creating buying appetite nonetheless.
CME April lean hog futures rose 1.8% to $70.65 a pound.
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(END) Dow Jones Newswires
February 14, 2018 15:20 ET (20:20 GMT)
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