U.S. live cattle slump as funds sell, but off lows

Chicago Mercantile Exchange (CME) live cattle futures moved lower on Wednesday as funds liquidated long positions, analsyts and traders said.

CME April and June live cattle fell below their respective 10-day moving average of 129.22 and 124.58 cents, triggering sell stops (all figures US$).

April closed at 128.8 cents per pound, down 0.825 cent, and earlier slumped to a May 2, 2012 low.

June settled 0.525 cent lower at 123.95 cents. It set a new contract low of 122.225 cents in after-hours trading.

Funds sold April and bought months further out prior similar moves on Thursday by followers of the Standard + Poor’s Goldman Sachs Commodity Index (S+PGSCI).

Funds that follow the index will shift their spot-month long positions mainly into June and August. The first of five days for that roll will begin on Thursday.

Some attributed Wednesday’s pullback to talk about a leaked U.S. Department of Agriculture e-mail that cast doubt on USDA statements that it would minimize the impact of furloughed meat inspectors on packing plants.

"Realistically, we don’t know how all of this is going to play out," said Doane Advisory Services economist Dan Vaught.

"But, people in the livestock industry have to be at least somewhat concerned that we may see some packing plants close down a day each week for a while," he said.

Still, futures finished off session lows as investors aligned the April contract with cash cattle in Texas and Kansas that sold at $128 per hundredweight (cwt), steady with last week.

And strengthening wholesale beef values stirred futures buying into breaks.

USDA data showed wholesale choice beef on Wednesday at $196.08/cwt, up $2.21 from Tuesday and $10.51 higher than a week earlier; select cuts jumped $3.28 to $194.80.

The recent rounds of wintry weather in the Plains slowed the movement of cattle to packing plants and limited the flow of fresh product to meat buyers.

Some traders are concerned that the same storm now pushing across the Mid-Atlantic states could briefly hurt meat demand in the region.

CME feeder cattle fell, with deferred months marking new contract lows, in sympathy with the lower deferred-month live cattle contracts.

Traders cited more pressure from weaker prices for feeder cattle at the most-watched Oklahoma City market.

March feeders settled 0.825 cent/lb. lower at 140.925 cents. April ended at 142.25 cents, down 1.35 cents and hit a fresh contract low of 140.7 cents in after-hours trading activity.

Uncertainty weighs on hogs

CME hogs remained under pressure from their premiums to the exchange’s lean hog index at 78.03 cents.

April hogs ended unchanged at 79.25 cents. It recovered from an initial fall to a new contract low of 78.25 cents.

June hogs closed down 0.1 cent to 89.45 cents after earlier plunging to an 8 1/2-month bottom.

"Packers are paying up for hogs right now because they need to make sure they have enough supplies on hand for this week’s slaughter," a trader said.

"But all this talk about Russia, China and laying off meat inspectors is making it tough to want to buy" futures, he said.

U.S. government data showed the average price for hogs in the most-watched Iowa/Minnesota market on Wednesday at $77.48/cwt, up 68 cents from Tuesday.

The wholesale price for pork on Wednesday averaged $79.41/cwt, down 47 cents from Tuesday, according to USDA.

China wants third-party verification that U.S. pork imports do not contain the feed additive ractopamine, which is used to promote leanness. Russia on Feb. 11 barred imports of U.S. beef, pork and turkey amid concerns over the use of the feed additive.

— Theopolis Waters writes for Reuters from Chicago.

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