Livestock Complexes Rebound Amid Strong Demand from Meat Packers

Strategic Insights -

U.S. futures in live cattle and lean hogs rose significantly on Wednesday, driven by a combination of rebounds in outside markets and strong demand from meat packers. The live cattle futures for October gained 1.4% to $1.227 a pound, while December cattle rose 0.9% to $1.2262 a pound. The beef complex was also supported by meat packers' eagerness to buy supplies, with cattle trading hands in Nebraska at steady to higher prices compared to last week.

Key Takeaways:

  • The live cattle futures for October closed up 1.67 cents, or 1.4%, to $1.227 a pound in trading at the Chicago Mercantile Exchange.
  • December cattle rose 1.07 cents, or 0.9%, to $1.2262 a pound.
  • Meat packers' eager purchases have surprised most participants, buying on Tuesday and Wednesday instead of holding out for lower prices.
  • The earlier-than-usual purchases are also notable given that signs suggest meat packers are currently slaughtering under weak to negative profit margins.
  • The latest HedgersEdge packer margin index for cattle is minus $46.90 per head, compared with minus $40.25 the previous day.
  • Export orders are typically more profitable than domestic sales, and meat packers are still in need of cattle for next week's slaughter schedule.
  • Choice beef prices rose 44 cents to $184.18 a hundred pound, and select beef added 2 cents to $170.34.
  • Lean hog futures closed higher on Wednesday, with the CME October hogs closing up 0.27 cent, or 0.3%, to 93.67 cents a pound.
  • Meat packers are planning heavy slaughter again this week, and total slaughter for the week is continuing the trend of higher production compared to a year ago.

Statistics:

  • Live cattle futures for October gained 1.67 cents, or 1.4%, to $1.227 a pound.
  • December cattle rose 1.07 cents, or 0.9%, to $1.2262 a pound.
  • Choice beef prices rose 44 cents to $184.18 a hundred pound.
  • Select beef added 2 cents to $170.34.
  • Lean hog futures closed up 0.27 cent, or 0.3%, to 93.67 cents a pound.
  • The Dow Jones Industrial Index was gaining 112 points to 10821 just before the close.
  • Crude oil prices closed up 5.3% to $79.68 a barrel.
  • The latest HedgersEdge packer margin index for cattle is minus $46.90 per head.
  • Total slaughter for the week is estimated to be about 2.32 million animals, or about 3.5% above a year ago.

Sources:

  • Dow Jones Commodities News via Comtex
  • Dow Jones Newswires
  • Marshall Eckblad and Curt Thacker, Dow Jones Newswires
  • U.S. Department of Agriculture