LIVESTOCK-US live cattle futures end mixed after fiscal deal

Wed Jan 2, 2013 3:57pm EST

* Traders nervous about futures' premium to cash
    * Feeders wilt; premium to cash, technical selling
    * Hogs rise with Dow surge, cash price expectations

    By Theopolis Waters
    CHICAGO, Jan 2 (Reuters) - CME live cattle ended narrowly
mixed on Wednesday, with uneasiness about futures' premium to
last week's cash cattle prices eroding morning gains fueled by
the U.S. fiscal deal, analysts and traders said.
    An agreement by Congress to avoid automatic year-end
spending cuts and tax hikes sent the Dow Jones Industrial
Average soaring more than 200 points.
    Meat company stocks joined in with Tyson Foods, JBS
USA Holdings Inc and Smithfield Foods Inc 
landing in the plus column.
    Traders who had been waiting on the sidelines for some type
of budget agreement felt better about returning to the market on
Wednesday, a Chicago Mercantile Exchange live cattle trader
said.
    But CME live cattle investors were also nervous about
expanding the futures' already sizable premium to cash cattle
which traded last week at $127 per cwt. 
    Live cattle for February closed up 0.075 cent per lb
to 132.375 cents. April ended down 0.200 cent to 136.175
cents.
    Traders expect cash cattle to trade steady to higher this
week compared with a week ago.
    Packers are buying supplies to process next week, the first
full workweek after the Christmas and New Year's holidays.
    The western and central U.S. Plains are in the grip of a
cold spell that could slow cattle growth rates and make fewer of
them available to packers.
     But a few processors will likely cut slaughter to offset
higher cash prices, improve their margins and lift wholesale
beef prices.
    HedgersEdge.com put the average beef packer margin for
Wednesday at a negative $57.30 per head, compared with a
negative $50.85 on Dec. 26, according to HedgersEdge.com.
    The price for wholesale choice beef Wednesday morning was
$194.01 per cwt, down 14 cents from Monday, and select cuts
jumped $1.40 to $182.45, according to the U.S. Department of
Agriculture.
    CME feeder cattle ended weaker, pressured by futures'
premium to the exchange's feeder cattle index at 147.34 cents.
Technical selling pulled down the March contract. 
    Spot January ended down 0.200 cent per lb at 151.200
cents. Most-actively traded March was off 0.375 cent at
153.900 cents.

    HOGS UP WITH WALL STREET
    Hog futures settled higher, driven by the budget resolution
in Washington and sentiments for higher cash hog prices in the
near term, analysts and traders said.
    February settled 0.450 cent per lb higher at 86.175
cents. April ended at 89.250 cents, up 0.525 cent.
    Some packers are seen raising cash hog bids as they prepare
for a big Saturday slaughter to make up for downtime during the
New Year's holiday, a trader said.
    And, he said, some hog farmers in the upper central and
western Midwest may keep doors to swine buildings closed to
retain heat as colder temperatures settle into the region.
    USDA data Wednesday morning showed the average hog price in
the eastern Midwest market at $81.59 per cwt, up $1.46 from
Friday. Hog prices in other hog growing areas were unavailable. 
    However, processors may soon look to salvage their poor
margins by cutting cash bids.
    The average pork packer margin for Wednesday was a negative
$3.65 per head, compared with a positive 75 cents a week
earlier, according to HedgersEdge.com.
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