U.S. livestock: Cash prices halt CME hogs’ losing streak

Chicago | Reuters — Chicago Mercantile Exchange lean hogs on Tuesday snapped a four-session slide, helped by short-covering and firmer prices for market-ready, or cash, hogs, traders said.

They said some investors bought deferred months as fears of a trade war eased.

Futures drew support from expectations for only a slight seasonal increase in hog numbers over the next couple of weeks, said Allendale Inc. chief strategist Rich Nelson.

Discussions over trade issues exaggerated CME lean hogs’ recent selloff, leaving some to wonder whether the market had actually bottomed out on Monday, he said.

The U.S. exports roughly one quarter of the pork it produces.

April’s gains were capped by funds in CME’s livestock markets that sold, or “rolled,” that contract’s long positions mostly into June in accordance with the Standard + Poor’s Goldman Sachs Commodity Index.

Tuesday was the last of five days for the roll process.

April hogs closed up 0.05 cent/lb. at 67.725 cents, and May finished 0.625 cent higher at 71.85 cents (all figures US$).

Mainly weaker live cattle futures

Most live cattle contracts at the CME were weakened by worries about increased supplies ahead, traders said.

But Tuesday’s better-than-expected cash cattle prices, aided by solid packer profits, underpinned April futures, they said.

April live cattle closed up 0.35 cent/lb. to 121.9 cents. June finished down 0.125 cent to 113.15 cents and August ended down 0.05 cent at 110.775 cents.

Processors on Tuesday bought a small number of cash cattle in the U.S. Plains for $126-$128/cwt, steady to $2 higher than a week ago.

“The trade is firmly convinced that we’ve already got the top in for the year and that we should expect generally lower cash prices almost each week from here on out,” said Nelson, regarding futures’ subdued response to this week’s cash results.

Cattle supplies typically increase after the first half of February as moderating temperatures allow livestock to add weight more quickly.

The most recent U.S. Department of Agriculture reports suggest larger numbers of cattle numbers in the months ahead.

Steady-to-lower cash feeder cattle prices and softer deferred month live cattle futures pressured CME feeder cattle contracts.

Feeder cattle futures suggest prices for calves are overpriced compared to returns for finished cattle, Nelson said.

“Even excluding the rally in corn prices, these feeder prices are still highly unprofitable,” Nelson said.

March feeders ended 0.625 cent/lb. lower at 141.55 cents.

— Reporting for Reuters by Theopolis Waters in Chicago.

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