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U.S. live cattle futures climb, led by soaring beef prices

By Julie Ingwersen

CHICAGO, May 12 (Reuters) - U.S. live cattle futures closed higher on Tuesday, with nearby contracts rising the daily maximum, as surging wholesale beef prices and expectations U.S. beef and pork production would drop spurred speculative buying, traders said.

Chicago Mercantile Exchange (CME) June live cattle futures settled up 4.5 cents, the expanded daily limit, at 97.175 cents per pound, approaching Friday's six-week high.

CME August live cattle finished up 4.5 cents at 101.700 cents, while August feeder cattle settled up 3.075 cents at 135.750 cents.

After the CME close, the exchange said it would raise the margins to trade live cattle futures by 4.2%, effective after Wednesday's session.

As meat-packing plants struggle with labor shortages due to the coronavirus pandemic, CME cattle and hog futures have been volatile as traders weigh support from soaring meat prices against pressure from huge back-ups of cattle and hogs in the country.

Beef prices took the spotlight on Tuesday. The choice boxed beef cutout rose on Tuesday afternoon to $475.39 per cwt, up $6.81 from Monday and up about $46 from a week ago, according to the U.S. Department of Agriculture (USDA).

"The market is following the cutout. The cutout is ruling everything," said Don Roose, president of Iowa-based U.S. Commodities.

In a monthly supply/demand report on Tuesday, the USDA lowered its forecast of U.S. 2020 beef production to 25.76 billion pounds, down 1.68 billion from its April figure. For pork, the government cut its forecast to 27.44 billion pounds, down 1.6 billion from last month.

"They took an axe to the production estimates for 2020, which is not surprising," said Altin Kalo, agricultural economist for Steiner Consulting.

Still, a large supply of cattle and hogs awaiting slaughter loom over the futures market. USDA projected that prices for steers would average $99 to $100 per cwt for the rest of 2020, below the price of CME August live cattle futures and deferred months.

"What they are saying is, you are going to have bigger numbers (of animals) coming at us," Roose said.

CME lean hog futures rose on Tuesday along with cattle futures, with the June hog contract settling up 1.050 cents at 61.325 cents per pound. (Reporting by Julie Ingwersen; Editing by Neil Fullick)

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