Chicago live cattle futures settled narrowly mixed on Monday as investors searched for direction, traders and analysts said.
Futures were "defensive" and moved in a narrow range amid uncertainty about how cash cattle and beef prices would play out this week, one trader said.
Chicago Mercantile Exchange (CME) livestock markets could also come under pressure as funds rebalance their portfolios on Tuesday, said Hales Trading Co. president David Hales.
Overall, funds are expected to reduce agricultural holdings — that is, livestock and grains — and increase those in softs and energy.
Also, CME live cattle and hog traders await the start of the roll by funds that follow the Standard + Poor’s Goldman Sachs Commodity Index (S+PGSCI).
Funds that track the index will shift their spot February long positions mainly into April and June. The first of five days for that roll will begin on Jan. 9.
Spot February closed up 0.05 cent per pound, to 133 cents. April ended at 136.7 cents, down 0.075 cent (all figures US$).
Futures maintained their premiums to the small number of cattle in the cash market last week that moved at $128 per hundredweight (cwt), up $1 from the week before.
Packers will either need cattle after buying sparingly in recent weeks or they have enough inventory to get them through the next week or so, said Joe Ocrant, president of Oak Investment Group.
Also, wholesale beef prices fluctuated as processors at times reduced slaughter rates to improve margins.
The price for wholesale choice beef on Monday was $193.49/cwt, down 77 cents from Friday; and select cuts were up 38 cents to 182.60, according to the U.S. Department of Agriculture.
HedgersEdge.com put the average beef packer margin for Monday at a negative $55.40 per head, compared with a negative $50.70 on Friday and a negative $67.60 on Dec. 31.
Most CME feeder cattle months gained modestly on spreads and firm deferred-month live cattle contracts.
Spot January ended up 0.075 cent/lb. at 153.25 cents. Most-actively traded March was off 0.225 cent at 156.1 cents and April closed at 157.925 cents, up 0.05 cent.
February hogs up, others down
CME spot February hogs drew support from spreading into that contract out of deferred trading months, analysts and traders said.
February settled up 0.075 cent/lb., at 86.3 cents. April ended at 89.55 cents, down 0.3 cents and June closed at 98.55, down 0.2 cent.
The prospect of higher cash hog values later in the week motivated February buyers, despite modest weakness on Monday.
Negative margins forced packers to lower cash hog bids, a trader said. And, some hogs are finally coming to market after being shut in by cold weather in parts of the Midwest last week, he said.
USDA showed the average hog price in the most-watched Iowa/Minnesota market at $83.71/cwt, down eight cents from Friday.
The average pork packer margin for Monday was a negative $5.70 per head, compared with a negative $3.25 on Friday and a negative $6 on Dec. 31, according to HedgersEdge.com.
However, some expect cash hog prices to rebound by midweek, given reduced hog weights that suggest most producers are current in sending their animals to market.
— Theopolis Waters writes for Reuters from Chicago.