LIVESTOCK-CME live cattle near 5-month top on cash market optimism

CHICAGO, July 31 (Reuters) - U.S. live cattle futures rose on Friday, with the benchmark October contract nearing a five-month high on expectations of firmer cash cattle prices in the coming week, traders said.

Chicago Mercantile Exchange (CME) August live cattle futures settled up 1.100 cents at 102.825 cents per pound. Most-active October rose 1.125 cents to close at 107.875 cents a pound after pushing through its 200-day moving average and reaching 108 cents, the contract’s highest since March 6.

Market-ready cattle traded at $97 per hundredweight in the southern Plains this week and as high as $102 in the western Corn Belt, the U.S. Department of Agriculture said.

The fact that live cattle futures were trading at a premium to the cash market suggests traders expect cash prices to rise, analysts said.

“They obviously are expecting the cash to get better, which is unusual in the summer,” said Dan Norcini, an independent livestock trader.

Meat packers appear to have worked their way through the worst of a cattle backlog that was created when numerous slaughterhouses shut down this past spring as the coronavirus sickened workers.

“The doomsday scenario that we envisioned in cattle never really happened. The industry did a pretty good job, somehow, of getting those cattle to not be a burden,” Norcini said.

CME feeder cattle futures followed the firm trend, drawing additional support from declining prices for corn, the primary feed grain. Benchmark September feeders rose 1.800 cents to 146.225 cents per pound.

Lean hog futures also advanced on Friday as traders squared positions at the end of the month. But bearish fundamentals hung over the market, capping rallies.

CME October lean hog futures settled up 1.300 cents at 49.625 cents per pound after dipping to 47.875 cents, the contract’s lowest since July 2.

The U.S. pork cutout fell $2.26 at $65.31 per cwt on Friday afternoon, with prices for hams falling more than $6. Packer margins for pork declined this week, discouraging packers from paying up for hogs, Norcini said. (Reporting by Julie Ingwersen; Editing by Tom Brown)