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Feeder cattle hit all-time highs

10/10/2013 @ 2:10pm

U.S. live-cattle futures extended gains early Thursday, propped up by short-covering after a round of selling the day before, sparked by concerns that U.S. beef exports could slow in the near term.

Live-cattle futures for October are up 0.15 cent, or 0.1%, to $1.2815 a pound at the Chicago Mercantile Exchange. December cattle are up 0.075 cent, or 0.1%, to $1.32025 a pound.

After a probe in South Korea in late September found traces of Zilmax in beef imported by a subsidiary of JBS SA, the country suspended imports from the single JBS Swift plant responsible for shipping the product. However, industry analysts are confident that because the drug is being phased out of use in the U.S., the export slowdown should be short-lived.

Feeder-cattle futures are breaking through all-time highs across all traded contracts, lifted by persistent concerns that young replacement cattle headed for feedlots are in extremely tight supply.

A severe blizzard this past weekend in southwest South Dakota and Wyoming--expected to have killed nearly 5% of South Dakota's cattle herd, which is made up of primarily cow-calf operations in that part of the state and many of which would be contributing young cattle to the feeder market this fall and in the spring--has added to supply worries throughout the week.

Further supporting prices are expectations for the cheapest feed costs in three years for feedlot operators, creating greater incentive for feeders and producers to bid more aggressively for young cattle.

October feeder-cattle recently picked up 0.72 cent to $1.6527 a pound, a new intrasession all-time high for the spot contract. November feeder-cattle are up 0.95 cent, or 0.6%, to $1.6732 a pound, also a new contract high.

"Cheap corn and the fact that cattle feeders are willing to assume maybe too much risk here" are factors propping up feeder-cattle prices, said Joe Hofmeyer, an analyst with CHS Hedging Inc. in St. Paul, Minn. "I think there's some upside in live-cattle prices because supplies are going to get tight, but [hedgers] have got to watch their break-evens carefully."

U.S. hog futures are continuing to fall amid technical selling, as traders largely see the market as overbought. Despite the absence of fundamental supply-and-demand news because of the government shutdown, small daily gains contributed to a 2.7% climb in December hog futures over the week, through Wednesday.

CME October hogs recently fell 0.42 cent to 89.40 cents a pound. December lean-hog futures are down 0.35 cent, or 0.4%, to 86.17 cents a pound.

Write to Kelsey Gee at kelsey.gee@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

October 10, 2013 11:38 ET (15:38 GMT)

DJ U.S. Feeder-Cattle Futures Push Through All-Time Highs; Hogs Down->copyright

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