Chicago | Reuters — Chicago Mercantile Exchange live cattle gained modestly on Wednesday during a trading strategy known as bear spreading in which investors sold October futures and simultaneously bought deferred months.
Some market participants used the spreads to avoid possible deliveries on Monday evening against the October contract.
Profit-taking and uncertainty about this week’s prices for market-ready, or cash, cattle dropped futures from session highs and further weighed on the October contract.
October live cattle finished down 0.025 cent/lb. at 109.075 cents (all figures US$). December closed up 0.025 cent at 114.925 cents, and February ended 0.4 cent higher at 118.925 cents.
Wednesday morning’s Fed Cattle Exchange (FCE) resulted in $108/cwt average cattle prices — about steady with last week’s trade in the U.S. Plains.
Bullish investors believe processors might bump up bids for remaining cattle following FCE’s $108/cwt sales. They also cited recent futures advances and extremely high packer profits.
Market bears contend that more animals for sale than last week, adequate near-term supplies and readily available cattle contracted against the futures market might hurt cash returns.
Investors will closely monitor wholesale beef demand as pork garners the retail advertising spotlight during October’s National Pork Month.
Profit-taking, technical selling and steady-to-lower cash feeder cattle prices dropped CME feeder cattle.
October ended 0.325 cent/lb. lower at 152.1 cents.
Mostly weaker hog contracts
Most lean hog contracts at the CME settled moderately lower on profit-taking after two days of gains led by upward-trending cash prices, said traders.
Investors sold deferred months and at the same time bought the October contract ahead of its expiration from trading on Oct. 13. The trading tactic is known as bull spreads.
October hogs ended 0.45 cents/lb. higher at 60.325 cents. Most actively traded December finished 0.175 cent lower at 61.9 cents, and February closed down 0.05 cent at 67.3 cents.
There is no shortage of hogs, but packers want to run as many animals through their plants as possible while taking advantage of their impressive profits and good pork demand, a trader said.
He said some investors were skittish about buying deferred hog contracts given the outlook for increased supplies over the next several weeks.
— Theopolis Waters reports on livestock markets for Reuters from Chicago.Tagged cattle futures, closing markets, CME, FCE, feeder cattle, hog futures, lean hogs, live cattle