October 5, 2017 / 10:20 PM / a year ago

LIVESTOCK-Cattle, hog futures climb on technicals, spreading

    By Michael Hirtzer
    CHICAGO, Oct 5 (Reuters) - Chicago Mercantile Exchange live
cattle         and lean hog futures         each climbed about 1
percent on Thursday, buoyed by spreading and technical trading
tied to expectations for gains in cash livestock markets,
traders said.
    Investors continued to take profits on front-month contracts
and roll into deferred positions.
    The most-active contracts for both cattle and hogs were
trading at a premium to cash markets as traders bet that the
cash values would rise in the coming weeks.
    "The basis levels are distorted," U.S. Commodities president
Don Roose said of futures' premium to the cash markets.
    "The (meat) packer has enough margin and the trade believes
he will share a little bit more as we go forward ... The bottom
line is that convergence will take place," Roose added.
    Most-active CME December live cattle futures        settled
up 1.125 cents to 116.150 cents per pound while the October
contract        was up 1.075 cents to 110.150 cents.
    CME November feeder cattle        finished 1.350 cents
higher at 154.850 cents per pound.
    Traders were awaiting deals in U.S. Plains cash cattle
markets. Sales at a weekly online auction on Wednesday of $108
per cwt represented a roughly $8 premium or basis to the
December futures equivalent of $116.
    Beef packers had the potential to earn huge margins and they
may be willing to pay cattle feedlots more for their animals to
entice more sales. The advisory HedgersEdge LLC estimated
average margins at $140.95 per cattle, up from $132.75 a week
ago and $126.20 a year ago.        
    Supplies of cattle, hogs and chickens were abundant,
however, likely capping gains in retail and wholesale meat
prices in a competitive protein market, Roose said.
    CME December lean hogs        were up 0.900 cent to 62.800
cents per pound and October hogs        up 0.600 cent to 60.925
    Cash hogs in the top market of Iowa and southern Minnesota
were up $1.03 to $53.03 per cwt, according to the U.S.
Department of Agriculture.

 (Reporting by Michael Hirtzer in Chicago)
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