U.S. live cattle and hog futures finished lower Tuesday in response to the stock market’s steep drop that ignited active fund selling in a wide range of commodities, said analysts and traders.
U.S. stocks plunged following weak earnings that fuelled worries about a global economic slowdown.
"All softs, grains and metals were lower amid economic weakness that likely kept money/fund managers on the sidelines in the cattle futures market," said David Hales, president of Hales Trading Co.
The Chicago Mercantile Exchange (CME) live cattle December contract fell below the 100-day moving average of 127.15 cents which triggered fund liquidation (all figures US$).
Spot October closed down 0.4 cent per pound, to 126 cents. Most-actively traded December ended at 126.85 cents, 0.425 cent lower.
Futures losses were limited by wholesale beef prices that rose after packers cut slaughter rates in an effort to shore up their sagging bottom lines.
HedgersEdge.com estimated beef packer margin for Tuesday at negative $24.35 per head, compared with negative $14.30 on Monday and negative $26.65 for Oct. 16.
The wholesale price for choice beef Tuesday morning was 62 cents per hundredweight (cwt) higher than Monday to $198.97 and select cuts jumped $1.62 from a week earlier to $183.15, according to the U.S. Department of Agriculture.
USDA estimated the combined cattle slaughter for Monday and Tuesday at 252,000 head, 1,000 less than a week earlier and down 6,000 from the same period a year ago.
CME feeder cattle closed lower on spot-October positioning before it expires on Thursday and the weaker live cattle market.
Spot October feeder cattle closed down 0.25 cent to 145.425 cents/lb. Most-actively traded November ended at 147.05 cents, 0.7 cent lower.
Hogs at the CME closed lower on fallout from the decline in equities and expectations for cash hog prices to decline as wholesale pork demand slows, said traders and analysts.
December and February slipped below their respective 10-day moving averages of 78.55 and 84.75 cents, setting off fund selling.
December closed 0.55 cent/lb. lower at 78.125 cents. February ended at 84.65 cents, down 0.525 cent.
The average hog price in the Iowa/Minnesota market Tuesday morning was up 92 cents/cwt from Monday to $83.78, but the eastern belt hog price dropped $1.04 to $79.68.
Also, hog futures moved lower in a bearish response to record-high pork inventories for September, as reported by USDA in its cold storage report on Monday.
K+S Financials analyst Jack Salzsieder said pork stocks were bearish for hog futures, with a large amount in warehouses consisting of hams stored for use during Thanksgiving and year-end holidays.
— Theopolis Waters writes for Reuters from Chicago.