Chicago | Reuters — Front-month live cattle futures on the Chicago Mercantile Exchange fell their daily limit on Friday, dipping to the lowest level since 2016 as traders reacted to weak cash cattle prices, brokers said.
Cash cattle traded at $100/cwt this week in Texas and Kansas, traders said, down from $103 last week (all figures US$). And wholesale beef prices continued to slide following the Labour Day holiday, the last major grilling holiday of the summer.
The U.S. Department of Agriculture late on Friday quoted choice boxed beef cutout at $227.31/cwt, down $2.11 from Thursday and well off a two-year high of $241.74 on Aug. 22. USDA said select cutout fell $2.53 Friday to $201.94.
“It’s obviously the cash market weakness — $3 lower in Kansas and quite a bit lower on a dressed basis in Nebraska,” Brock Associates analyst Doug Houghton said of Friday’s sell-off.
CME October live cattle futures fell the daily three-cent limit to settle at 94.875 cents/lb., a contract low and the cheapest on a continuous chart of front-month cattle futures since Oct. 14, 2016.
CME Group said it would expand limits in live cattle futures for Monday’s trade to 4.5 cents/lb.
Technical selling accelerated after the October contract on Thursday dipped below its mid-August low of 97.775 cents.
“The weakness was set up when we broke out to the downside of the trading ranges,” Houghton said.
Feeder cattle futures followed the weaker trend, with CME October feeders ending down 1.425 cents at 130.9 cents/lb.
Like live cattle, CME lean hog futures also posted limit declines Friday as plentiful near-term hog supplies pressured cash values and demand from China remained lackluster.
CME October lean hog futures settled down 2.8 cents at 63.5 cents/lb. and December fell its three-cent limit to 62.475 cents. Daily limits in hogs will widen to 4.5 cents for Monday’s trade.
USDA reported export sales of U.S. pork in the week to Aug. 29 at 17,700 tonnes, down 38 per cent from the previous week. The total included 1,400 tonnes earmarked for China. Some traders have been expecting China to import more pork as it struggles with a meat shortage due to the spread of African swine fever in its hog herd, the world’s largest.
But the U.S. trade war with China has impeded sales of U.S. pork to the Asian country. A new round of U.S. tariffs on Chinese goods took effect on Sept. 1.
“They (China) are not going to be buying for the foreseeable future, with tariffs going up this week,” Houghton said.
Cash hog prices in the Iowa and southern Minnesota market fell $0.59 on Friday, although the pork cut-out rose by $1.36, USDA said.
— Julie Ingwersen is a Reuters commodities correspondent in Chicago.