U.S. live cattle futures on Wednesday ended firm, and at one point spiked to their highest level in more than five months, driven by cash cattle price optimism and improved wholesale beef values, said analysts and traders.
Chicago Mercantile Exchange feeder cattle posted modest gains but hogs ended lower.
CME live cattle investors grew confident about this week's cash cattle prices following last week's stronger-than-expected sales, driving live futures to a level not seen since mid-March.
Cash bids surfaced in Texas at $120 per hundredweight (cwt) against $126 asking prices, a feedlot source said. No bids or asking prices were reported elsewhere in the U.S. Plains (all figures US$).
The choice wholesale beef price Wednesday was estimated at $191.14/cwt, up 69 cents from Tuesday. Select cuts gained $1.14 to $181.83 cents, according to the U.S. Department of Agriculture.
Some believe grocers bought beef to feature after Labour Day, but others said packers raised wholesale prices to counter higher cash cattle costs that wore down their margins.
HedgersEdge.com pegged Wednesday's average beef packer margin at negative $3.80 per head, compared with positive $24.95 on Aug. 29.
In beef export news, a U.S. senator was encouraged by the steps Japan has taken to ease beef import restrictions possibly by early next year.
CME live cattle traders took the news in stride.
"We've got a lot of bullishness baked into the market already and that doesn't hurt at all, but I don't think that's enough to give us another leg up," said Pete Adams, a principal with PNM Trading.
October live cattle closed up 0.15 cent to 126.325 cents. December ended up 0.375 cents to 129.25 cents.
Feeder cattle settled moderately higher as corn prices tumbled, easing feed input costs for cattle feedlots.
September ended up 0.05 cent, to 145.050 cents. October closed up 0.175 cent, to 147.125 cents.
Hog futures dropped as cash hog prices spiraled downward amid plentiful supplies, said traders and analysts.
The average price of hogs in the most-watched Iowa/southern Minnesota market fell seven consecutive days to $68.80 cents/cwt, $1.82 lower than on Tuesday, according to USDA.
They also said heavier hogs are flooding the retail market with fresh pork, giving grocers leverage to buy product at lower prices.
Wholesale pork prices averaged $78.06/cwt, $2.57 lower than on Wednesday, according to government estimates.
The government average weight data showed hogs in the Iowa/southern Minnesota market last week at 268.2 lbs., which was down almost half a pound from the prior week but up 4.7 lbs. from the same period last year.
Producers are moving hogs ahead of schedule to avoid further price cuts and packers have enough hogs booked in advance, said University of Missouri economist Ron Plain.
Industry sources forecast a Saturday slaughter about 325,000 head that if accurate would be the largest weekend slaughter since 340,000 head on Jan. 7.
Some packers are making up for Monday's Labour Day downtime by processing more hogs on Saturday. Hogs that backed up on farms over the three-day holiday weekend are now coming to market.
And swine farmers continue to liquidate some of their herds after feed costs soared to record highs as one of the worst droughts in the United States in half a century dried up fields and pastures.
October closed 0.575 cent lower at 73.625 cents/lb.; December was also 0.575 cent lower, at 71.875 cents.
-- Theopolis Waters writes for Reuters from Chicago.