U.S. livestock: CME live cattle slump on cash price outlook

Profit-taking drops CME hog futures

CME
(CMEGroup.com)

Chicago | Reuters –– Chicago Mercantile Exchange live cattle futures retreated on Thursday after investors pocketed profits in anticipation of steady or lower cash prices, traders said.

October live cattle ended at 157.375 cents per pound, 2.325 lower, and December fell 2.4 cents to 159.7 (all figures US$).

Futures slid after packers in Texas and Kansas rolled back bids for slaughter-ready, or cash, cattle from $162 to $160 per hundredweight (cwt), feedlot sources said. Sellers were asking up to $166 for their animals, they added.

Last week, cash cattle in the U.S. Plains fetched $163.

Cash bids are $3 lower than last week’s sales, but that does not mean packers will pay $160 for cattle, a trader said.

Nonetheless, bullish traders dumped long positions with the view that futures’ losses and fading packer margins might pressure cash returns.

Beef packer margins for Thursday were a positive $1.70 per head, compared with a positive $10.25 on Wednesday and a positive $33.15 last week, according to Colorado-based analytics firm HedgersEdge.com.

Funds trading in CME’s live cattle and hog markets shifted October long positions further back in a procedure known as the “roll” by followers of the Standard + Poor’s Goldman Sachs Commodity Index (S+PGSCI).

Thursday was the fourth of five days for the S+PGSCI roll process.

Profit-taking and the live cattle futures’ selloff dropped CME feeder cattle contracts.

September closed 0.8 cent/lb. lower at 228.05 cents, and October was down 1.525 cents at 225.6 cents.

Lower hog futures

CME live hogs felt pressure from profit-taking and worries that the tight-supply-driven seven-day cash price rally may end soon, traders said.

October closed 0.725 cents/lb. lower at 106.375 cents, and December finished at 97.2 cents, down 1.45 cents.

The morning’s average hog price in the western Midwest plunged $3.41/cwt from Wednesday in light volume to $99.18, said USDA.

Thursday’s pork packer margins were a positive 70 cents per head, compared with a positive $3.95 on Wednesday and a positive $8.05 a week ago, based on Hedgersedge.com estimates.

“Packer margins will be helped somewhat if that afternoon cutout stays as strong as the morning report,” independent livestock futures trader Dan Norcini said.

Government data showed the morning’s wholesale pork price, or cutout, gained $2.10/cwt from Wednesday to $108.25.

Deferred hog contracts settled flat to higher despite USDA’s forecast for a record 2014 corn and soybean crop, which could encourage producers to expand their herds.

Back months may have drawn support from bear spreads, consisting of traders who bought those contracts and simultaneously sold nearby months, Norcini said.

Producers will expand herds because of two vaccines and enhanced biosecurity measures against the deadly pig virus along with low-cost corn, he said.

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

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