U.S. livestock: Fund selloff sinks CME live cattle to 4-month low

Photo: Canada Beef Inc.

Chicago | Reuters – Chicago Mercantile Exchange live cattle futures fell to their lowest level in four months on Monday, hit by fund selling and Friday’s bearish U.S. government cattle report, traders said.

Last Friday’s U.S. Department of Agriculture monthly Cattle-On-Feed report showed ranchers in October placed the highest number of cattle in feed lots for the month in six years.

“There is just too much beef, pork and poultry out there that has to be priced into the domestic market,” said Linn Group analyst John Ginzel.

December live cattle finished 1.750 cents per pound lower at 117.100 cents. February ended down 1.650 cents at 123.025 cents and below the 40-day moving average of 123.625 cents.

Futures’ setback further reflected investor unease about this week’s prices for slaughter-ready, or cash, cattle that last week brought $118 to $120 per cwt versus $122 to $125 the previous week.

Packers last week paid less for supplies before plants shut down over the U.S. Thanksgiving Day holiday, traders and investors said.

Processors may try to pay less for cattle this week by scaling back production to improve their margins and stimulate tepid wholesale beef demand.

Sell stops, live cattle futures losses and steady-to-lower cash feeder cattle prices dropped CME feeder cattle.

November feeder cattle closed down 2.175 cents per pound to 149.550 cents.

Hog futures end higher

Short-covering, technical buying and higher wholesale pork values boosted CME lean hogs, traders said.

CME lean hogs drew more support from participants that bought that contract and simultaneously sold live cattle futures through a trading strategy known as spreads.

“There was huge spreading. In fact that’s one of the major plays of the algorithm traders,” said Linn Group’s Ginzel.

December hogs ended up 1.375 cents per pound to 62.025 cents and above the 200-day moving average of 61.969 cents. February closed 1.400 cents higher at 68.475 cents, above the 40-day moving average of 68.431 cents.

Based on USDA’s Monday wholesale pork prices, retailers may have bought product to avoid potential shortages due to holiday plant closures, a trader said. Pork belly prices surged as end-users store them for spring and summer bacon demand, he said.

Monday’s wholesale pork price spike and downward-trending cash hog prices, because of ample supplies, should enhance already impressive packer profits, the trader said.

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