U.S. live cattle futures posted their biggest one-day percentage loss in three and a half months on Tuesday and slumped about two per cent amid fund liquidation, said traders and analysts.
Chicago Mercantile Exchange (CME) live cattle fell about 1.8 per cent on the day.
"You had funds liquidating after we gave up the moving averages. We hit a bunch of sell stops and longs panicked and just wanted out of their positions," said Oak Investment Group president Joe Ocrant.
Spot-October dropped below the 100-day moving average of 124.12 cents. Most-actively traded December fell beneath 40- and 100-day moving averages of 128.43 and 127.29 cents (all figures US$).
Spot October live cattle closed 2.6 cents per pound lower, or 2.08 per cent, at 122.7 cents. Most-active December ended at 125.8 cents, down 2.6 cents or 2.02 per cent.
Market losses fueled further pessimism about cash cattle prices, already challenged by unprofitable packer margins and tepid wholesale beef demand, traders said.
Isolated cash bids were quoted in Texas at $122 per hundredweight (cwt). There were no bids reported elsewhere in the U.S. Plains where cattle were priced at $127 or higher, said feedlot sources.
Choice beef at wholesale was priced at $192.68/cwt, down one cent from Monday and select cuts dropped 87 cents to $181.56, according to U.S. Department of Agriculture estimates.
The average beef packer margin for Tuesday was negative $37.15 per head, compared with negative $31.10 on Monday and negative $33.55 for Sept. 18.
CME feeder cattle fell with the lower live cattle market and technical selling in the October contract.
Thinly-traded spot-September ended down 0.575 cent/lb., or 0.4 per cent, at 143.2 cents. The contract will expire Thursday.
Most-actively traded October closed 2.225 cents lower, or 1.51 per cent, at 145.175 cents.
Hog futures turned lower on sentiment that packers may soon cut bids for cash hogs to salvage their margins, and amid seemingly ample supplies, despite higher cash prices on Tuesday, said traders and analysts.
The average hog price in the most-watched Iowa/Minnesota market was $74.57 per cwt, $1.09 higher than on Monday, USDA said.
HedgersEdge estimated the average pork packer margin for Tuesday at positive $6.20 per head, compared with positive $8.35 on Monday and positive $20.55 for Sept. 18.
"Just as the market overreacted to the downside, it is now overreacting to the upside. There is still a tremendous amount of pork being produced," a trader said.
USDA estimated Tuesday’s hog slaughter at 437,000 head, up 2,000 from a week earlier and 8,000 more than during the same period a year ago. It was also the biggest one-day slaughter since about 440,000 head on Sept. 4.
Spot October CME hogs closed down 0.225 cent/lb., or 0.29 per cent, to 76.275 cents. Most-actively traded December ended 0.7 cent lower, or 0.93 per cent, at 74.65 cents.
— Theopolis Waters writes for Reuters from Chicago.