May 6, 2013

 

US wholesale beef prices surge on high demand

 

 

As US wholesale beef prices approached an all-time high fuelled by growing grilling demand, Chicago Mercantile Exchange (CME) live cattle futures moved higher on Thursday (May 2).

 

The wholesale price of choice beef, or cut-out, Thursday morning rose US$0.81 per hundredweight (cwt) to US$200.30/cwt., which is the highest since US$200.65 on October 20, 2003 and near the October 16, 2003 record of US$201.18, according to USDA.

 

"I'm sure packers are loading up for grilling specials. Even if the cut-out stays where it is next week, I can see futures going higher," said Oak Investment Group president Joe Ocrant.

 

Live cattle June ended at US$1.24, up US$0.012. August closed up US$0.01 at US$1.24. This week's steady-to-higher cash cattle prices enhanced futures' advances.

 

Cash cattle in Texas and Kansas moved at US$128 to US$129/cwt, steady to up US$1 from last week, said feedlot sources. They said live-basis cattle in Nebraska fetched US$130 to US$131, steady to up US$3.

 

Fewer cattle available for sale and robust wholesale beef demand caused processors to pay at least steady money for supplies, traders and analysts said.

 

Spot-June CME live cattle benefited from bullish spreads. The move offset funds that sold the spot month and bought deferred contracts in advance of similar moves next week by followers of the Goldman Sachs Commodity Index. Funds that follow the Standard & Poor's Goldman Sachs Commodity Index will shift their June long positions into August and October. The first of five days for that roll will begin on May 7.

 

CME feeder cattle futures closed in tandem with the higher live cattle market. May feeder cattle closed at US$1.41, US$0.011 per pound higher. And August settled up US$0.009 at US$1.50.

 

CME hogs closed mixed. Lower wholesale pork prices pressured June futures while pre-Goldman rolling by funds underpinned July, analysts and traders said. CME June hogs settled down US$0.00125 at US$0.93 per pound and July closed at US$0.93, up US$0.0005.

 

"Cash hog prices are a tossup now that the cut-out and packer margins are down. Packers will probably respond by cutting kills next week and lowering cash bids," a trader said.

 

Hog prices in the most-watched direct Midwest markets were unavailable Thursday morning. US pork packer margins on Thursday were estimated at a negative US$6.45 per head versus a negative US$3.50 on Wednesday (May 1) and a positive US$8.50 a week ago, according to HedgersEdge.com.

 

USDA's Thursday morning mandatory wholesale pork price, calculated on a plant-delivered basis, was US$86.71/cwt, down US$2.10 from Wednesday. Heavy snowfall in parts of Iowa and Minnesota created problems moving some hogs to market, a trader said.

 

Packers on Thursday processed 415,000 hogs, 6,000 less than a week earlier, according to USDA estimates.