Chicago | Reuters — Chicago Mercantile Exchange live cattle futures on Friday closed higher after volatile action, stirred by short-covering following recent market losses pegged to fund selling and sagging cash prices, traders said.
Despite this week’s lower prices for market-ready or cash cattle, futures remained underpriced based on those returns which attracted buyers.
August live cattle finished 0.975 cent per pound higher at 149.125 cents, and October rose 0.925 cents to 151.65 cents (all figures US$).
Cash cattle in the U.S. Plains sold at $155 to $156 per hundredweight (cwt), down $2 to $3 than last week’s all-time highs.
Packers resisted spending more for cattle to conserve their margins while awaiting the delayed seasonal increase in supplies.
Investors are watching wholesale beef prices that are expected to top out soon as hot weather deters consumers from eating heavier meals.
Friday morning’s wholesale price for choice beef dropped 88 cents/cwt from Thursday to $251.29/cwt. Select beef reached $244.66, topping Thursday’s record, according to U.S. Department of Agriculture data.
CME livestock fund investors sporadically liquidated their August long positions, and mainly bought October futures, in a procedure known as the “roll” by followers of the Goldman Sachs Commodity Index (S+P GSCI).
Friday was the fourth of five days for the S+P GSCI roll process.
CME feeder cattle finished weak in choppy trading on fund liquidation, but were off morning lows due to late-session short-covering.
“When you have a lot of funds in a thinly traded market, it tells me they don’t know how to get out,” said Citigroup futures specialist Sterling Smith.
Lower corn prices in reaction to Friday morning’s bearish USDA grain reports cushioned CME feeder cattle’s initial fall.
August closed down 0.225 cents/lb. to 210.375 cents, and September 0.575 lower at 211.625.
Hog futures gain on short-covering
CME hog futures closed flat to higher on short-covering, said traders.
Deferred-months’ discounts to CME’s hog index at 130.93 cents aided market advances, they said.
Cash hog prices will be key in the coming weeks as tighter supplies due to the porcine epidemic diarrhea virus clash with heavier hogs helped by cheaper corn.
USDA morning direct market hog price data was unavailable. Hog prices in the U.S. Midwest traded steady to $1/cwt lower, according to hog dealers.
CME hog August and October buying returned both contract above their respective moving average support levels.
July hogs closed unchanged at 132.8 cents/lb.
August ended up 0.725 cent to 128.675 cents, and above the 40-day moving average of 128.59 cents. October closed 0.85 cent higher at 113.8 cents and over the 20-day moving average of 112.35 cents.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.