U.S. livestock: Fund sales reverse initial live cattle gains

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures on Monday settled lower after profit-taking and fund liquidation beat back early-session advances following Friday’s higher cash prices, traders said.

June live cattle closed 1.225 cents/lb. lower at 120.775 cents, and August ended down 1.25 cents to 116.55 cents (all figures US$).

Last week packers bought market-ready, or cash, cattle for $124 to $132.50/cwt. That was up from $122 to $126.50 the week before.

“We’re not talking about what’s happening today or next week or in two weeks. We’re talking about early July,” CHS Hedging analyst Steve Wagner said. He referred to cattle possibly gaining weight if sellers decide to hold them back to get better prices.

Packers tend not to pay as much for cattle that exceed their weight requirements. And bigger animals usually result in more tonnage for retailers, which could hurt wholesale beef values.

The morning’s choice beef price, or cutout, at $223.67/cwt rose $1.06 from Friday. Select cuts dropped 39 cents to $197.97, the U.S. Department of Agriculture said.

Fund selling erupted after June and August fell below their respective 20-day moving averages of 121.35 cents and 117.58 cents.

Chart-related selling and live cattle futures losses pressured CME feeder cattle contracts.

Traders also cited higher corn prices that may increase input costs for feedlot operators.

August finished 1.15 cents/lb. lower at 145.525 cents.

Mostly higher hog market close

CME lean hogs closed mostly higher after traders bought deferred months and at the same time sold June ahead of its expiration on June 14.

Investors simultaneously bought deferred-month lean hog futures and sold live cattle contracts with the view that higher grain costs and hot summer weather might curb hog production.

Currently, there is no fundamental reason for hog futures gains on Monday, yet there are some expectations for cash prices to reach $90/cwt this summer, said Wagner.

USDA’s morning direct hog data showed cash prices were unquoted and wholesale pork values up modestly.

Spot June closed down 0.05 cent/lb. to 82.25 cents. July ended 0.825 cent higher at 86.8 cents and peaked at a fresh contract high of 87.4 cents.

Theopolis Waters reports on livestock markets for Reuters from Chicago.

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