LIVESTOCK-CME feeder cattle hit fresh peaks on shrinking supplies, strong cash prices

By P.J. Huffstutter

CHICAGO, July 22 (Reuters) - Chicago Mercantile Exchange cattle futures continued to rally on Tuesday, with feeder contracts setting new all-time highs, as U.S. cash prices remained firm and domestic supplies of replacement animals continued to shrink, market analysts said.

But nearby live cattle contracts, including CME's October LCV25, ended the day lower on profit taking, analysts said.

Futures and cash prices have both soared as cattle inventories have dwindled to their lowest levels in decades and meatpackers have been forced to pay more to buy animals to process into beef, even as their margins have been stubbornly in the red.

This week, cash sales of feeder cattle are expected to be selling up to $8 per hundredweight (cwt) higher in the Midwest, said Karl Setzer, a partner at Michigan-based Consus Ag.

Meanwhile, processors on Tuesday lost an estimated $197.95 per head of cattle they slaughtered, compared to losses of $113.40 a week ago, according to data from HedgersEdge.com.

Still, the price gap between CME cattle futures and cash cattle prices has kept fund traders bullish on the protein sector, despite some signs of weakness in wholesale prices, said Don Roose, president of agricultural broker U.S. Commodities.

Wholesale boxed beef prices were mixed on Tuesday morning, with choice cuts turning $1.23 higher at $373.30 per cwt, while select cuts dropped $2.32 to $347.73 per cwt, according to U.S. Department of Agriculture data.

"Yes, there are some red flags out there," Roose said. "But futures are at too big a discount against the cash to really see much price movement right now."

CME August live cattle futures LCQ25 settled down 0.250 cent at 224.975 cents per pound, while most-active October live cattle futures LCV25 ended down 0.500 cent at 221.125 cents per pound. CME August feeder cattle futures FCQ25 ended 0.675 cent at 328.275 cents per pound.

Strength in the cattle markets rolled over to the pork sector, even as wholesale carcass prices eased on Tuesday, USDA data showed. CME August lean hog futures LHQ25 ended up 0.400 cent at 107.750 cents per pound.