LIVESTOCK-US live cattle futures mostly higher as corn surges

Mon Aug 19, 2013 5:24pm EDT

* Higher deferred live cattle lift feeder cattle
    * More hogs weaken nearby CME hog contracts

    By Theopolis Waters
    CHICAGO, Aug 19 (Reuters) - Chicago Mercantile Exchange
deferred live cattle futures rose on Monday in reaction to ideas
the surge in corn prices will slow cattle production, traders
and analysts said.
    CME live cattle and hog traders bought deferred months with
the view that livestock producers may feed fewer cattle and hogs
and fatten them to lighter weights if corn costs continue to
climb.
    Chicago corn futures rose more than 20 cents per bushel in
the December, March 2014 and May 2014 contracts on Monday, on
worries dry weather the next two weeks in the Midwest will trim
corn yields.
    Also, anticipation of fewer cattle, as ample grazing
pastures keep cattle out of feedlots longer, encouraged
far-month speculative buyers.
    Bear spreads, driven by the belief that cash cattle and
wholesale beef prices may have topped out in the near term,
closed the lightly traded spot August contract lower.
    "We don't have a problem with last week's higher cash, but
we wonder if we're going to see many more weeks of $2 gains like
this," said Allendale Inc chief strategist Rich Nelson. 
    Last week, packers in Texas and Kansas paid $123 per
hundredweight (cwt) for cash cattle, up $2 from the week before.
Nebraska cattle traded at $125, up $1.50 from the previous week.
    News on Friday that Merck & Co suspended sales of
the cattle growth additive Zilmax provided modest support to
late-winter and early 2014 CME live cattle contracts.
 
    Feedlots will switch from Zilmax to Optaflexx, another
growth enhancer, which should result in less animal weight loss
than had been initially expected, said David Hales, president of
Hales Trading Co.
    On Monday morning, the U.S. Department of Agriculture
reported the wholesale choice beef price at $195.22 per cwt, up
83 cents from Friday. Select cuts were down 72 cents at $185.67.
    Spot August live cattle ended down 0.250 cent to
123.650 cents per lb. Most-actively traded October 
closed up 0.150 cent at 128.075 cents and December 
finished 0.400 cent higher at 130.450 cents. 
    CME feeder cattle prices posted modest gains with support
from the live cattle market. Futures also were supported by $1
to $3 per cwt higher cash feeder cattle prices at Monday's
Oklahoma City market supported futures.
    August feeder cattle futures closed at 154.900
cents, up 0.125 cent per lb, while September closed at
157.950 cents, 0.275 cent higher.
     
    NEARBY HOGS STEADY-LOWER
    Nearby CME hogs settled steady to lower on sentiment that
cash hog and wholesale pork prices will peak before the Sept. 2,
U.S. Labor Day holiday, traders said.
    USDA on Monday morning reported the average hog price in the
western Midwest was up 87 cents at $94.99 per cwt, while the
price in the eastern Midwest was down $1.97 to $94.25.
    A seasonal increase in hog numbers make it unlikely that
packers will bid higher for hogs. However, some processors still
need hogs to round out this week's production schedule.
    Grocers are buying pork on an as-needed basis as they stock
meat cases to accommodate Labor Day grilling demand.
    USDA on Monday morning showed the wholesale pork price at
$103.28 per cwt, up 37 cents from Friday.
    Speculative traders bought deferred hog futures contracts in
anticipation that higher corn prices will discourage hog farmers
from adding to their herds.
    October hogs ended at 86.475 cents per lb, down
0.250 cent. December finished unchanged at 83.450 cents
and February closed down 0.050 cent at 85.425 cents.
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