Chicago Mercantile Exchange (CME) hog futures closed lower on Monday on profit taking amid uneasiness about near-term cash price direction, traders and analysts said.
They said some investors reduced long positions on the eve of the final trading day of the month of April while waiting to see what May brings.
CME hogs’ “rich” premium to the exchange’s lean hog index, which was at 81.42 cents, kept buyers on the defensive.
CME June hogs settled 0.375 cent lower at 92.15 cents per pound (all figures US$). July hogs closed at 92.5 cents, down 0.25 cent.
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Early Monday, nearby hog futures spiked to 2-1/2 month highs driven by beliefs that cash hog and wholesale pork prices would move higher as grocers booked more product for grilling features.
“But forecasts for wet weather this week in the central third of the nation could again postpone backyard cookouts,” a trader said.
And the lack of U.S. Department of Agriculture cash hog price information Monday morning only served to heighten cash price uncertainty, he said.
“This thing could get ugly if cash is quoted lower later this afternoon,” the trader said.
USDA’s Monday morning mandatory wholesale pork price, calculated on a plant-delivered basis, was $88.22 per hundredweight (cwt), up $1.07 from Friday.
Consolidation weakens cattle
CME live cattle futures slipped on consolidation heading into the last full trading session of the month, analysts and traders said.
Futures buyers at times priced in last week’s stronger-than-expected cash cattle values. And improved spring grilling demand prospects periodically provided market support.
Cash-basis cattle last week fetched $128 to $130/cwt, compared with mostly $126 the week before, according to feedlot sources.
But June futures’ stubborn deep discount to recent cash returns spawned selling into market rallies.
“June suggests lower cash prices over the next few weeks. That may not be the case if packers chase supplies as seasonal demand for grilling heats up the cutout,” a trader said.
The government’s Monday morning data showed the average wholesale choice beef price, or cutout, at $194.30/cwt, $1.41 higher than Friday; select cuts jumped 77 cents to $185.20.
The spot April live cattle closed at 127.7 cents per lb., down 0.15 cent. Most-actively traded June ended at 122.55 cents, down 0.05 cent.
CME feeder cattle finished sharply lower while feeling pressure from modest live cattle market losses and surging corn prices. Expensive feed could raise input costs for cattle feeding operations.
May feeder cattle closed at 140.425 cents, down 1.375 cents/lb. And August finished 1.3 cents lower at 149.875 cents.
— Theopolis Waters writes for Reuters from Chicago.
