Chicago Mercantile Exchange (CME) live cattle futures were higher on Tuesday with a major snowstorm slamming into the U.S. Plains' cattle-feeding states, slashing fed cattle weights and slowing livestock movement, analysts and traders said.
"This is the second big storm in five days so there is no doubt we are taking some serious weight, some serious beef tonnage off the market," said Don Roose, president of U.S. Commodities, in Des Moines, Iowa.
"We've had an oversupply coming on and now I think the number of cattle coming to market will be coming down and weights will be coming down," Roose said.
CME February live cattle were up 0.325 cent per pound at 127.275 cents; April was up 0.875 cent at 129.3 (all figures US$).
Feeder cattle turned up in line with the gains in cattle but gains were slowed by an upturn in the Chicago Board of Trade (CBOT) corn market.
CME March feeder cattle were up 0.375 cent, at 141.175 cents/lb., and April up 0.325 cent, at 144.025 cents/lb.
"Rolling" furloughs eyed
Gains in cattle futures were restrained on a lack of bullish enthusiasm or momentum, even though a government official said the Obama administration may institute a "rolling" furlough to keep meat plants open during automatic budget cuts rather than idle all 8,400 U.S. meat inspectors at the same time.
"It's just another uncertainty in the market and markets never like uncertainty. It's keeping some people away from the market that could be potential bullish buyers," said Dennis Smith, a broker for Archer Financial.
Although the spending cuts are due to take effect on Friday, it could be weeks or months before the meat industry is directly affected. The U.S. Department of Agriculture has not specified a date when furloughs would begin, but says they are unavoidable.
The snowstorm not only was cutting into livestock weights but slowed processing of meat in the U.S. Plains and Midwest.
Packers on Monday processed 87,000 head of cattle, down 22,000 from a week earlier and 33,000 less than a year ago during the same period, based on USDA data.
Heavy snowfall covered nearly all of the U.S. Plains on Tuesday, adding valuable moisture for the drought-stricken wheat and pasture grazing lands while snarling transportation and hampering cattle feeding and calving, an agricultural meteorologist said.
"I think talk of how severe this storm is has brought in some buying along with a little better beef market. Wholesale beef is not sharply higher but it's up nicely," Smith said.
U.S. beef packer margins on Tuesday were a negative 46.25, versus a negative 42.25 on Monday and a negative 69.55 a week ago.
Deliveries on the February contract, which is set to expire on Feb. 28, totaled 21 contracts. CME data showed R.J. O'Brien issued eight, ADM Investor Services issued 13 and Rosenthal Collins Group stopped the deliveries.
April hogs sag, others rise
Most CME lean hog futures contracts were up on bargain buying after the spot contract fell to its lowest level in three months on Monday, reaching a session low of 81.65 cents/lb. Spot April eased slightly again on Tuesday on bear spreading, buying the back months and selling April.
Hog futures have been falling as the market attempted to find fair value, traders said.
CME April lean hogs were down 0.325 cent/lb. at 81.575 cents; May was up 0.7 cents/lb. at 89.5 cents.
"Hogs are still searching for a bottom. It may be in but there is no strong technical signal," Smith said.
The April contract's discount to CME's lean hog index at 82.63 cents may be attracting speculative buyers but there was a notable lack of bullish momentum in the market. Last Friday, April closed at 81.65 cents/lb.
Cash hogs around the U.S. Midwest traded steady to $1 per cwt lower on Tuesday, as packers showed little need for supply, dealers said.
U.S. pork packer margins on Tuesday were a positive 6.65, versus a positive 5.45 on Monday and a negative 10.00 a week ago, according to Hedgersedge.
The CME lean hog index for the two days ending Feb. 22 is 82.63 and for the two days ending Feb. 21 is 83.78.
-- Sam Nelson is a Reuters correspondent covering agricultural futures markets in Chicago.