U.S. livestock: Lean hog futures bounce, cattle end lower

Funds seen liquidating large net-long position in cattle

cme june live cattle
CME June 2019 live cattle with 20-, 50- and 100-day moving averages. (Barchart)

Chicago | Reuters — U.S. lean hog futures on the Chicago Mercantile Exchange (CME) closed higher on Tuesday in a technical rebound after Monday’s limit-down close, with firm cash hog values lending support, traders said.

Technical traders were encouraged that the benchmark June hog contract was able to hold above Monday’s low, a supportive chart signal.

CME June lean hog futures closed up 2.45 cents at 89.125 cents/lb. and July lean hogs rose 2.3 cents to settle at 90.05 cents (all figures US$).

“Yesterday’s reaction was just overdone to the downside,” said Doug Houghton, analyst with Brock Associates, noting hogs and other markets were pressured on Monday by fears of a prolonged trade war between the U.S. and China.

Lean hog futures bounced on Tuesday along with Wall Street after President Donald Trump downplayed the U.S.-China trade war as “a little squabble,” a day after a spike in tensions between the world’s two largest economies rattled markets.

Meanwhile, hogs in the Iowa and southern Minnesota cash market rose 48 cents on Monday, even as hog futures plunged.

The volatility in CME lean hog futures this spring underscores the degree of uncertainty among traders about Chinese demand for pork. The Asian country is grappling with an outbreak of African swine fever in its massive hog herd while it is engaged in a trade row with the U.S.

“There continues to be huge anticipation that China is going to import a lot more pork, most of it during the second half of the year,” Houghton said. “But it’s hard to gauge that because they have not been in the U.S. market now for several weeks, after a couple of big purchases,” Brock added.

CME live cattle futures drifted lower on Tuesday as commodity funds continued to unwind a sizable net long position, analysts said.

CME June live cattle futures settled down 0.25 cent at 109.5 cents/lb. and August live cattle fell 0.2 cent at 106.725 cents/lb.

“The cattle market, I still think, is mostly just the funds liquidating. They had that record-large (net long) position two or three weeks ago, and they are trying to get out of it because the cash market is coming down,” said Alan Brugler, president of Brugler Marketing and Management.

CME feeder cattle futures fell in response to a jump in Chicago Board of Trade corn and soybean futures, which clawed back from recent declines as traders shifted their focus to U.S. planting delays.

“Feed costs are going up, so that hurt the feeders,” Brugler said.

August feeder cattle fell 0.6 cent at 142.5 cents/lb. and September feeder cattle ended down 0.725 cent at 143.575 cents.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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