U.S. livestock: CME live cattle slump limit down

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures finished Wednesday’s session down by their three-cents-per-pound daily price limit on profit-taking ahead of potentially lower cash prices later this week, traders said.

Spot December and February closed at 129.1 cents and 131.625 cents/lb., respectively (all figures US$). Live cattle’s trading limit will be expanded to 4.5 cents on Thursday.

Packers in Kansas and Texas bid $125-$126/cwt for market-ready (cash) cattle that sellers priced at more than $132, feedlot sources said. Cash cattle last week moved at mostly $126 to $127.

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The futures decline is not based on new bearish fundamental information, but on investors realizing that futures’ premium to cash prices was too high, said Allendale Inc. chief strategist Rich Nelson.

Despite the morning’s uptick in wholesale beef values, packers may rein in cash spending given their negative margins and more animals for sale than last week, traders and analysts said.

Wednesday morning’s wholesale choice beef price jumped 95 cents/cwt from Tuesday, to $204.76. Select cuts were up 13 cents, to $192.82, based on U.S. Department of Agriculture data.

The average beef packer margin for Wednesday was negative $15.55 per head, compared with a positive $10.75 on Tuesday, as calculated by HedgersEdge.com.

December and February futures losses mounted after they drifted below their respective 10-day moving average of 130.7 cents and 132.94 cents.

Fund liquidation, soft cash feeder cattle prices and live cattle futures’ selloff dropped CME feeder cattle contracts. January ended 3.675 cents/lb. lower at 160.725.

Lower hog futures settlement

Profit-taking and spillover pressure from the neighboring cattle markets weighed on CME lean hogs, traders said.

Spot December finished 0.6 cent/lb. lower at 59.35 cents, and February closed down 0.625 cent, to 59.15 cents.

Potential market bulls clung to the sidelines while awaiting clear fundamental direction after the morning’s cash prices were reported mixed and wholesale pork values firm.

The week-over-week decline in hog weights suggests tight supplies in parts of the Midwest, while some packers have enough hogs including what is expected to be a Saturday kill in excess of 220,000 head, a trader said.

“I feel a lot better about this market in the past few days than a week ago,” said Nelson, citing 2016 first-quarter pork supplies that are expected to be smaller than the fourth-quarter of 2015.

Theopolis Waters reports on livestock markets for Reuters from Chicago.

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