U.S. live cattle futures rallied on Tuesday, helped by news that Japan could ease U.S. beef import restrictions soon, triggering short-covering, traders and analysts said.
Japan could relax its BSE-related import rules on U.S. beef on Feb. 1 if a panel of medicine and food experts consents, a Japanese health ministry spokesman said.
Japan's potential as a beef importer is supportive for the market, said Shawn Walter, president of Professional Cattle Consultants.
But how much will be allowed into the country under new rules proposed by the government versus restrictions placed by individual buyers is uncertain, he said.
The market may be feeding more off the prospect of tighter supplies in the coming months once the industry works through ample numbers of cattle in the near term, he said.
Investors also pointed to higher wholesale beef prices as helping Chicago Mercantile Exchange (CME) live cattle futures break a three-day losing streak.
The price for wholesale choice beef Tuesday morning was $190.73 per hundredweight (cwt), 89 cents higher than Friday; and select cuts jumped $1.78 to $184.39, according to the U.S. Department of Agriculture (all figures US$).
CME spot February live cattle closed 0.775 cent per pound higher at 125.725 cents. And, most-actively traded April finished 0.650 cents higher at 130.475.
Futures in after-hours trading barely moved in response to USDA's monthly cold storage data. It showed total beef stocks in December at 465.5 million lbs., up five per cent from November and up two per cent from December 2011.
Investors await this week's cash cattle trade with futures nearly in line with last week's cash prices at $124-$125/cwt.
U.S. packers are buying supplies for next week, the first full week of slaughters after Monday's Dr. Martin Luther King, Jr. Day holiday, which is supportive for cash prices.
However, processors will be mindful of their margins, which have not been in the black since September, according to HedgersEdge.com data.
The average beef packer margin for Tuesday was at a negative $55.25 per head, compared with a negative $45.85 on Jan. 15.
CME feeder cattle futures drew support from the higher live cattle market and short-covering, snapping a nine-day futures skid.
Spot January closed up 0.5 cent/lb. at 144.4 cents. Most-actively traded March was up 0.65 cent to 147 cents.
Hogs gain as temps fall
Hog futures firmed in anticipation of higher cash hog prices as temperatures plunge in parts of the northwestern and central Plains.
Much colder weather will make it difficult to transport hogs, especially if trucks are not outfitted to prevent animals from getting frostbite, one trader said.
Also, hog farmers may be reluctant to open doors to swine confinement buildings so that they can retain heat, he said.
Still, some packers may push back against higher cash prices given their unprofitable margins.
HedgersEdge.com showed the average pork packer margin for Tuesday at a negative $9.05 per head, compared with a negative $3.30 on Jan. 15.
In after-hours trading, CME hog futures had very little reaction to the government's cold storage report for December, showing pork inventories at 554.4 million lbs. It was down one per cent from the previous month but up 14 per cent from December 2012.
Spot February hogs settled 0.35 cent/lb. higher at 85.7 cents. April ended at 88.275 cents, up 0.2 cent.
-- Theopolis Waters writes for Reuters from Chicago.