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Cattle Futures Extend Gains After On-Feed Supply Report

Updated: 04/30/2014 @ 6:01pm

U.S. cattle futures are higher early in the session Monday, lifted by a closely-watched federal inventory report released after the trading week's close Friday which indicated a smaller number of cattle could be headed to the market in the months ahead.

April cattle are up 0.75 cent, or 0.5%, to $1.4575 a pound at the Chicago Mercantile Exchange. Most-active June cattle recently picked up 0.525 cent to $1.3730 a pound.

The cattle market has been underpinned by a report that showed fewer head of cattle in the nation's feedyards than industry watchers had anticipated, signaling supplies could remain tight in the months ahead. The U.S. Department of Agriculture's cattle-on-feed report released Friday showed that about 5% fewer young cattle, known as placements, entered U.S. feedyards in March compared with the prior year.

The placement number at 1.795 million head was almost seven percentage points lower than the average of analysts' estimates, which pegged the figure up 1.7% from 2013.

"I thought we'd have more cattle coming to market based on other [cattle-on-feed] reports previous to Friday's," said Dan Norcini, an independent trader in Coeur d'Alene, Idaho, noting the aggressive placement pattern this fall and winter. A bumper corn crop and record prices for fattened cattle have given feedyards more incentive to aggressively bid for light-weight feeder-cattle.

Feeder-cattle futures are hitting all-time intrasession highs, lifted by the expectations for feed ingredients to remain relatively inexpensive, and for the tight supply of young cattle to continue to support current price levels. Most-active August futures recently advanced 1.72 cents to $1.8635 a pound.

"For people like me who have been trading these markets for twenty years, you look at these [livestock] prices and just marvel, but if ranchers are working to rebuild herds, I guess it's not a surprise," Mr. Norcini said. Years of drought and historically high grain costs fueled herd thinning by ranchers, and as owners seek to build the number of cattle they can sell to feedyards, some may be retaining female animals on the farm. This has the near-term effect of further pinching supplies.

Hog futures are sliding amid a continued drop in wholesale pork and cash market prices. Most-active June hogs are down 1.17 cents to $1.2335 a pound.

Write to Kelsey Gee at kelsey.gee@wsj.com
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(END) Dow Jones Newswires
April 28, 2014 11:58 ET (15:58 GMT)
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