Blizzard fears send cattle limit-up
U.S. cattle futures surged to the daily limit on one-day gains Monday on concerns a blizzard taking aim at the southern Plains could tighten near-term beef supplies.
Hog futures also gained in trading Monday, benefiting from gains in agricultural commodities.
Live cattle for December and February delivery closed up three cents, the daily limit on one-day gains under Chicago Mercantile Exchange rules. The December contract gained 2.5% to close at $1.2115 a pound, and the February contract rose 2.5% to $1.215 a pound. Futures for young cattle, known as feeders, closed higher as well, with the January contract settling 1.1%, or 1.62 cents, higher at $1.4467 a pound.
Blizzard warnings in major cattle producing areas of the southern Plains fueled the gains. The National Weather Service issued a blizzard warning for the Texas and Oklahoma panhandles, southwestern Kansas and parts of Colorado and New Mexico into Tuesday.
Severe winter weather can tie up cattle supplies and slow down production as weight gain drops and the risk of animal deaths increases. Futures climbed Monday as traders built in a risk premium for the potential supply constraints the storm could produce.
"The heavy, wet snow will bring a period of very stressful conditions for livestock," private forecaster Freese-Notis Weather wrote in a report Monday.
Further fuel for the rally came from short covering as traders who speculated prices would fall bought contracts to close out positions. Some analysts had thought prices would fall Monday following a U.S. Department of Agriculture report released after Friday's market close that showed an unexpected jump in the number of cattle added to U.S. feedlots in November.
Going into the report, market participants likely were pushing too hard on the downside, so when prices started to climb on the storm forecasts, they started to exit short positions that bet on a decline in prices, said Jason Britt, president of Central States Commodities.
As for the week ahead, estimates showed a pullback in the cattle showlists for major producing states, with an estimate of 88,000 to 93,000 head for Nebraska compared to 100,000 to 105,000 head a week ago.
Cash markets were generally quiet Monday after trading wrapped up late last week. Asking prices were reported at $1.22 a pound or higher in Texas, but no bids were reported.
Last week, prices in Texas wrapped up at mostly $1.19 a pound compared with $1.20 the prior week, while prices in Kansas pulled back to $1.18 a pound from $1.20 a week earlier, according to market participants. They also reported the trade coming in from $1.19 a pound to mainly $1.20 in Nebraska.
Packers may not buy many cattle this week or next ahead of the holidays due to shortened processing schedules during the second half of this month and first week in January.
The U.S. Department of Agriculture reported choice boxed-beef prices at midday up $1.54 a hundred pounds at $191.29 while select beef rose 44 cents to $173.20 a hundred pounds on 113 total loads.