U.S. livestock: Fund liquidation erases CME hogs’ new high

Chicago | Reuters — Chicago Mercantile Exchange hogs on Wednesday slumped on profit-taking and fund liquidation that pulled futures down from a high set earlier in the session, traders said.

Fund selling and sell stops developed after the June contract fell below the 20-day moving average of 127.209 cents (all figures US$).

April hogs closed down 0.8 cents per pound to 127 cents, after peaking to a new contract high of 128.775 cents in electronic trading. June hogs finished 2.8 cents lower at 124.8 cents.

Futures initially spiked, driven by their discounts to cash hog prices and solid wholesale pork values. Anticipation of those positive fundamentals possibly turning negative triggered selling.

The U.S. Department of Agriculture’s morning direct hog price data was not available. Hogs in the Midwest early Wednesday traded steady, hog dealers said.

Some packers bought hogs for the rest of this week’s production. Others have their needs met after cutting slaughters to offset reduced supplies pegged to the spread of porcine epidemic diarrhea virus (PEDv) on U.S. farms.

Fewer hogs made less pork available for processors and grocers looking to book product for post-Easter holiday advertisements.

The morning’s wholesale pork price jumped $1.11 per hundredweight (cwt) from Tuesday to an all-time high of $133.74, led by the $6.93/cwt surge in costs for pork bellies, USDA said.

Traders actively sold summer hog contracts with the view that less-costly corn may prompt producers to feed hogs to heavier weights, which help counter production lost to PEDv during that period, said Linn Group analyst John Ginzel.

Most cattle turn up on spreads

Most CME live cattle firmed, supported by traders who simultaneously bought back months and sold April futures in a trading strategy known as bearish spreads, traders said.

April futures felt more pressure from uncertainty regarding cash prices for this week based on unprofitable packer margins but higher wholesale beef prices.

An isolated cash cattle bid of $147 per cwt surfaced in the southern U.S. Plains against $153 asking prices from sellers, a feedlot source said.

Last week, cash cattle in Texas and Kansas fetched a record high of $152/cwt, and Nebraska cash cattle hit a $154 record, feedlot sources said.

The early wholesale choice beef price rose $1.31/cwt from Tuesday to $233.85. Select cuts gained $1.34 to $224.29, based on USDA data.

The retailers looking at beef and pork at such high prices will begin to wonder if they should start featuring chicken or fish, said Ginzel.

HedgersEdge.com calculated the beef packer margins for Wednesday at an estimated negative $90.35 per head, compared with a negative $76.95 on Tuesday and a positive $5.65 a week ago.

April live cattle closed down 0.15 cents/lb. to 144.6 cents, and nearly par with the 20-day moving average of 144.67 cents.

June ended up 0.3 cent at 136.775 cents and August finished 0.5 cent higher at 134.475 cents.

Fund buying and lower corn prices boosted feeder cattle futures.

April closed 0.775 cent/lb. higher at 177.225 cent, and May ended 1.2 cents higher at 177.975 cents.

— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.

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