Chicago Mercantile Exchange live cattle futures settled mixed on Thursday as funds sold their October positions and bought deferred contracts while conducting a strategy called a “roll.”
Funds that use the Standard + Poor’s Goldman Sachs Commodity Index (S+PGSCI) shifted, or rolled, their CME live cattle and hogs October long positions mainly into December. Thursday was the fourth of five days for the manoeuvre.
Live cattle October closed down 0.225 cent at 124.825 cents per pound. December ended up 0.05, at 128.625 cents (all figures US$).
Slipping wholesale beef prices and ample cattle supplies on the spot market backed expectations of steady-to-lower cash prices. Last week, cattle in the U.S. Plains fetched $123 per hundredweight (cwt).
Cash cattle bids in Texas and Kansas stood at $121 versus $125 asking prices, feedlot sources said.
The U.S. Department of Agriculture on Thursday morning showed the wholesale choice beef price, or cutout, at $193.86/cwt, down seven cents from Wednesday. Select cuts dropped 79 cents to $177.69.
Speculative traders bought deep-deferred live cattle contracts in anticipation of tighter overall supplies.
CME feeder cattle closed higher as corn prices receded in response to the U.S. government’s bearish crop production report.
Less costly feed can encourage feedlot demand for young cattle.
Fund buying and modest back-month live cattle futures advances contributed to CME feeder cattle gains.
September closed 0.65 cent higher at 157.025 cents while October finished at 158.6 cents, up 0.375 cent.
Hogs uneven amid fund roll
The roll by funds out of the October CME hog contract into deferred months resulted in a mixed futures settlement that pared early-session gains.
October hogs closed down 0.1 cent at 90.2 cents/lb. and December up 0.025 cent at 87.275 cents.
Futures initially spiked on higher cash hog and wholesale pork prices amid tight supplies, traders and analysts said.
USDA on Thursday morning reported the average hog price in the most-watched Iowa/Minnesota market at $94.81/cwt, $1.89 higher than on Wednesday.
Prior to Thursday, producers in the Midwest were leery of transporting hogs during a heat wave that slowed animal weight gains.
And supplies are scarce now after hog farmers moved animals ahead of schedule to take advantage of higher cash prices before the Labour Day holiday.
Profit-taking pulled down CME hogs from morning highs, said traders. They said sellers were motivated by the belief that cash hog and wholesale pork prices are about to top out as supplies increase seasonally.
Some investors sold deferred hog months with the view that cheaper corn this fall could increase hog production.
However, the possibility that spread of the Porcine Epidemic Diarrhea virus (PEDv), which is fatal to baby pigs, will reduce hog supplies later this year underpinned far-month hog months.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.