July 16, 2010
CME cattle prices rise consecutively
Cash-basis cattle sold for US$93-US$94 per hundredweight, compared with mainly US$92 last week.
"Packers bought cattle earlier in the week than expected because they ran short on supplies," a veteran CME cattle trader said. "In doing so, though, it took a toll on their margins heading into next week's cash trade."
Operating margin index for beef packers for Wednesday (Jul 14) was plus US$16.30 per head, compared with plus US$23.15 Tuesday (Jul 13), as calculated by HedgersEdge.com, which put packer margins a week ago at US$46.95.
Live cattle began mostly weaker on profit-taking and negative forces from outside markets tied to lacklustre economic data that trumped encouraging US weekly jobless claims news.
Those in CME's live cattle pit look to the financial markets as an indicator of consumer demand for various expensive household goods, including high-end beef cuts.
Cattle traders later turned away from outside market forces and focused on this week's futures/cash relationship. Gains in the August and October contracts triggered buy orders, and eventually both contracts rose above Wednesday's two-month high.
Meanwhile, the weaker dollar and the climb in Chicago Board of Trade corn motivated far-month cattle buyers. A cheaper dollar tends to improve US exports overall. High-priced corn is supportive for cash cattle prices in the future, because cattlemen may put off herd expansion plans if faced with expensive feed costs.
Spot August live cattle closed up 0.07 cent a pound, or 0.09%, at 92.40 cents. Most-actively traded October finished up 0.17 cent, or 0.2%, at 93.57 cents.
Floor-traded CME feeder cattle ended weaker because of expensive CBOT corn that could boost cattle feeders' input costs. August and September also triggered sell orders when both months retreated below their respective 10-day moving average support areas.
Spot August feeders closed down 0.25 cent, or 0.2%, at 113.37 cents. Nearby September closed up 0.52 cent, or 0.5%, at 113.42 cents.
