Chicago | Reuters — Chicago Mercantile Exchange feeder cattle futures closed sharply lower on Wednesday, pressured by profit-taking that ended the market’s run of six straight sessions at new highs.
“It doesn’t surprise me that futures would take a breather after going up so fast,” a trader said.
Futures were also overpriced based on CME’s feeder cattle index at 196.4 cents (all figures US$).
August feeder cattle finished 2.3 cents per pound lower at 202.875 cents, and September was down 2.175 cents at 203.625 cents.
Feeder cattle losses hit live cattle
CME live cattle finished lower, pressured by selling in the neighbouring feeder cattle pit, traders said.
“A lot of traders who were long live cattle futures were looking at the break in the feeders,” said Oak Investment Group president Joe Ocrant.
Uncertainty about prices for market-ready, or cash, cattle leaned on the June live cattle contract.
Isolated cash cattle bids surfaced in Texas and Kansas at $143 per hundredweight (cwt), with no word from sellers, feedlot sources said.
Last week, cash cattle in the southern Plains moved at $145/cwt, with sales of $146 in Nebraska.
Fewer cattle available for sale and profitable beef packer margins may underpin cash prices.
Packers are determined to keep a lid on cash prices by cutting kills, which, along with improved beef demand, recently pushed up wholesale beef prices.
Wednesday morning’s wholesale choice beef price gained eight cents/cwt from Tuesday to $232.59. Select cuts rose $1.05, to $223.40, the U.S. Department of Agriculture said.
Investors simultaneously sold August futures and bought deferred months in a trading strategy known as bear spreading.
June ended at 143.025 cents, down 0.475 cent, and August fell 1.2 cents, to 142.2 cents.
Mixed hogs settlement
CME hogs ended mixed with June supported by higher cash prices, but July drew pressure from its premium to the exchange’s hog index at 111.54 cents.
USDA’s Wednesday afternoon average hog price in the Iowa/Minnesota market was up $1.01/cwt from Tuesday, at $115.59.
Packers are buying hogs for the rest of week’s kill, but may soon lower cash bids to conserve their margins, a trader said.
Speculators bought deep-deferred hog contracts in anticipation of tight supplies pegged to the porcine epidemic diarrhea virus.
June hogs, which will expire on June 13, ended 0.675 cent/lb. higher at 115.975 cents. July closed down 0.125 cent to 125.025.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.