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U.S. livestock: CME live cattle fall sharply with initial cash prices

Lower cash, pork prices sink CME hog futures

CME
(CMEGroup.com)

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures finished down sharply on Tuesday, pressured by preliminary sales of slaughter-ready or cash cattle at lower prices, traders said.

August ended down the three-cents-per-pound daily price limit at 149.625 cents (all figures US$). October finished 2.775 cents lower, at 147.675 cents.

On Tuesday morning, a small number of cash cattle in Nebraska sold at $155 per hundredweight (cwt), $5 lower than a week ago, feedlot sources said.

Returns for unsold cattle may also suffer the same fate given a looming seasonal supply increase and waning beef demand heading into the fall.

Tuesday afternoon’s choice wholesale beef price dropped $1.29/cwt from Monday to $258.15. Select beef rose $1.51 to $253.13, the U.S. Department of Agriculture said.

“Traders are thinking that as far and as fast as the cattle market surged in June and July, it is vulnerable to a pretty substantial drop from this point,” said Doane Advisory Services economist Dan Vaught.

However, much of the bearishness may have already been factored in to the market given the August contract’s sizeable discount to recent cash prices, he said.

Market participants sold August futures, which will expire on Aug. 29, and simultaneously bought back months in a trading strategy known as bear spreading.

Fund liquidation and sell-stops hastened October futures losses.

CME feeder cattle nearby contracts ended down the three-cents-per-pound daily price limit following the live cattle market’s steep drop and lower prices for feeder cattle in local markets.

August closed 2.925 cents/lb. lower at 214.55 cents, and September at 214.65, down 2.775 cents.

Hogs buckle under cash pressure

CME hogs finished lower in response to deep cuts in cash and wholesale pork values, traders said.

August, which will expire on Aug. 14, closed down 0.475 cent/lb. at 114.075 cents.

October ended down the maximum three cents per pound daily price limit at 97.175, and December 2.25 lower at 87.3 cents.

The afternoon’s average price of hogs in Iowa/Minnesota slumped $3.30/cwt from Monday, to $110.46, USDA said.

Government data showed Tuesday afternoon’s wholesale pork price at $117.02/cwt, $3.50 lower than Monday.

The seasonal buildup of hogs at heavy weights compared with last year pressured prices for market-hogs and pumped more pork into the retail pipeline, a trader said.

Speculators sold deferred months with the view that cheaper feed might cause hog farmers to expand their herds, he said.

China has barred pork imports from six U.S processing plants effective on Wednesday over the use of a feed additive that promotes lean muscle growth, according to USDA.

— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.

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