US cattle: Moving higher amid cash supply jitters

Live cattle futures prices Wednesday are higher amid mounting trader concerns about thin cash-market supplies and higher prices.

The most-active April contract recently traded 0.95 cent a pound, or 0.84%, higher at $1.1472. The soon-to-expire February contract recently traded up 0.55 cent a pound, or 0.50%, at $1.0960.

March feeder cattle were 1.02c, or 0.80%, higher at $1.2955 in electronic trading. April feeders were up 1.12 cents, or 0.86%, at $1.3102.

The most-active April live cattle contract ran into resistance at Tuesday's high in the opening minutes of the pit session but pushed above it to challenge resistance at the two-week-old high of $1.1470 of Feb. 1.

Informal surveys show that the number of cattle being offered to packer buyers this week is down from last week. Market analysts said the fact that February futures prices are higher than last week prompts feedlots to hold cattle off the market for another week of feeding.

Cattle also were held back to give them time to recover from the effects of last week's winter storm. During the storm, the cattle did not grow or fatten as desired by the feedlots, and many withheld cattle from this week's showlists.

Packer purchases last week also were considered by many to be only light to moderate, leaving packers to draw on their company-owned and contract cattle to meet their slaughter needs. However, these numbers are limited, and many futures and cash traders feel packer buyers now will have to pay more to get cattle from the feedlots.

It is possible, that packers could trim slaughter rates to avoid having to buy aggressively in the cash market this week, a private trader said. However, with plant margins still thought to be nearly $10 a head, the tendency would be to continue full-schedule plant operations even if they have to pay more for the cattle, traders said.

The latest HedgersEdge packer margin index is a plus $9.60 a head, compared with the previous estimate of a plus $6.90. This is a rough estimate of packer returns on the cattle they slaughter and process expressed in the form of an index.

Many traders still fear inflation will become a problem as the economy recovers from recession, said Mike Zuzolo, market analyst at Global Commodity Analytics. At the same time, though, other traders are concerned that foreign governments will intervene to slow inflation, which would tend to pressure grain and meat prices, he said. The push and pull of these two ideas keeps futures markets jittery.

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