CHICAGO: US cattle futures surged about 2 percent on Thursday as cash prices came in better than traders had anticipated and touched off another round of short-covering.
Chicago Mercantile Exchange live cattle spot April, and most-actively traded June, breached their respective 10-day moving averages at 119.97 cents and 116.07 cents, which triggered fund buying.
By day's end, CME live cattle notched their biggest one-day percentage point increase since Jan. 3, aided by the spot-April contract that hit its 3-cent daily price limit at 121.375 cents.
CME spot April live cattle ended 2.875 cents higher, up 2.43 percent, at 121.250 cents per lb. Most-actively traded June cattle closed up 2.100 cents, or 1.83 percent, at 117.150.
Short-covering from Wednesday extended into Thursday after packers surprisingly raised bids for slaughter-ready cattle even though their operating margins have hemorrhaged red ink since September 2011.
Early-week consensus had processors keeping a tight lid on cattle prices as wholesale beef values resumed their downward trend. Also, more cattle were available for sale this week than a week ago.
As of Thursday, live-basis cattle in the Plains traded fully steady with last week's mostly $122 to $123 per cwt sales.
"A lot of people at first put on a huge number of April/June bear spreads thinking cash would come down. They were caught off guard by that $122 and $123 Wednesday evening trade when they came in this morning," a CME live cattle trader said.
Others who looked for a reason to buy cattle futures turned to April's discount to cash prices and the market's technically oversold condition.
Cattle futures drew further support from the lower dollar and higher equities, boosted by diminished euro zone debt worries and China's strong GDP growth. Both factors overshadowed disappointing US weekly jobless claims data.
"Cash was the catalyst to get some short-covering and had some people picking a bottom," said Jim Clarkson. "The stock market was up big and the dollar being down doesn't hurt," said Jim Clarkson with A&A Trading.
The government's morning beef cutout, which reflects the price of beef at wholesale, showed choice beef at $176.55 per cwt -- another 51-cent drop on top of Tuesday evening's $1.02 setback.
HedgersEdge.com estimated beef packer margins at a negative $96.80 per head, which was up $5.30 from Wednesday and $23.95 from a week ago.
Feeder cattle contracts climbed sharply on live cattle's upswing that drove August and September up their 3-cent trading limits.
Actively traded May feeders finished 2.825 cents higher, up 1.89 percent, at 152.250 cents per lb.
HOGS TAKE CUE FROM CATTLE
CME hog futures gained modestly with the help of the live market run-up along with Wednesday's pork cutout and cash hog price bounce.
However, uneasiness about cash hog prices heading into the weekend and spreading out of hogs into cattle minimized hog futures advances.
Spot April hogs closed up 0.350 cent, or 0.42 percent, at 83.525. Most active June ended 0.575 cent higher, up 0.62 percent, at 93.225 cents.
"The cutout yesterday afternoon was probably the best they had in weeks. But some of the guys who were long hogs and short cattle liquidated those positions when cattle started turning higher yesterday," said independent hog futures trader Bill Cipolla.
USDA's morning data estimated the average price of hogs at the benchmark Iowa/southern Minnesota market at $79.33 per cwt, down $1 from the previous day.
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