Live cattle futures reached an eight-week peak Thursday as high beef prices continue to underpin a rally in the market.
April live cattle futures climbed 1.3% to close at $1.19200 a pound at the Chicago Mercantile Exchange, the highest since Jan. 19 and close to the highest level in a year.
Futures trading took support from a brisk cash cattle trade on Wednesday in which feedyards were able to sell their cattle to packers for anywhere from $1.27 a pound in the southern states like Texas and Kansas to as much as $1.32 a pound further north in Nebraska and Iowa. That trade in turn took its cue from Wednesday morning’s Fed Cattle Exchange auction, where prices average at $1.28 a pound.
That spread of around 10 cents a pound between cash cattle and April futures prices is historically large, analysts said, reflecting the fact that traders have been convinced that cash prices will take a nosedive to futures level when more supply comes onto the market in the spring.
But that conviction is starting to change, as traders bet that cash prices will continue strong into next month.
“Cattle [futures] look like they’re finally moving in response to the cash markets that won’t break down,” said Dan Norcini, an independent trader in Idaho.
Behind all of this is the price of wholesale beef, which rose to $2.22 a pound as of Thursday morning. That means healthy margins for meat packers, which are eager to keep buying and processing cattle while the rally lasts.
“Seasonally, we’re right where we topped last year. That’s not an abnormal situation,” said Scot Miller, an independent broker in Montana. But “this beef advance has been stronger than normal.”
Traders were less keen on lean hog futures, however, which fell 0.3% in Thursday’s session to 69.900 cents a pound in anticipation of a glut of supply. In contrast to cattle, pork prices are cheap at the moment. That could be a boon to futures, however, when the price difference trickles down to retailers and consumers are tempted to sub in pork cuts over beef, says Mr. Norcini.
“Beef prices will have moved up, making pork look cheap by comparison,” he said. “People are going to start buying hogs.”
Grain and soybean futures inched into the black Thursday, as traders took advantage of sharp price discounts following a selloff this month.
May soybean futures rose after eight consecutive sessions of losses, adding 3.5 cents, or 0.4%, to close at $10.01 1/2 a bushel at the Chicago Board of Trade. Prices have recently zigzagged around $10 as traders tested whether prices would stabilize at those levels.
The fall in soybean prices came after government and private-sector forecasters raised estimates for the Brazilian soybean harvest, which is set to break production records. Bets that the season would be derailed by weather problems have so far missed the target, with Brazil’s harvest on, or even slightly ahead of, schedule.
Corn prices, meanwhile, got a boost from better-than-expected export sales. The USDA put 2016/2017 corn exports at 1.255 million metric tons in the week ended March 9, above analyst estimates that forecast highs of 1.100 million tons. Chinese interest in buying U.S. corn spurred optimistic bets on corn prices this week.
CBOT May corn futures closed up 0.7% at $3.66 a bushel in Thursday’s session.
External factors also helped grains and oilseeds. The dollar fell, helping U.S. agricultural exports’ competitiveness, while crude oil stabilized after falling sharply last week.
May CBOT wheat closed unchanged at $4.36 a bushel.
Crude settled down 11 cents at $48.75 a barrel.
Natural gas prices fell Thursday, pressured by the prospect of warmer temperatures and a slightly smaller-than-anticipated withdrawal from stockpiles.
Natural gas for April delivery fell 7.9 cents, or 2.65%, to $2.902 a million British thermal units on the New York Mercantile Exchange.
Stockpiles shrank by 53 billion cubic feet in the week ended Friday, the U.S. Energy Information Administration said, compared with 59 bcf expected by analysts surveyed by The Wall Street Journal.
The S&P 500 retreated Thursday, weighed down by declines in shares of health-care and energy companies.
Major indexes began the day with gains, but traded mostly lower later in the session as oil prices resumed a downward slide.
Some investors said it wasn’t surprising to see a pause, with stocks trading near all-time highs and at higher-than-average valuations.
“The markets have priced in a lot of very good news — better economic growth, a big fiscal package, deregulation and lower taxes,” said Michael Arone, chief investment strategist at State Street Global Advisors. “My intuition tells me not all of those things are going to go as swimmingly as the market is anticipating and, as a result, you’ll see some volatility.”
The Dow Jones Industrial Average lost 15.55 points, or 0.1%, to 20934.55. The S&P 500 edged down 3.88 points, or 0.2%, to 2381.38 and the Nasdaq Composite added 0.71 point, or less than 0.1%, to 5900.76.