CME feeder cattle futures plunge as corn prices surge

Chicago Mercantile Exchange feeder cattle futures closed sharply lower on Monday, with October down its limit of three cents per pound, as investors worried that high-priced corn may curb feedlot demand for young cattle, traders said.

Corn prices at the Chicago Board of Traded spiked near their 40-cent daily price limit led by hot weather in the U.S. Plains that could hurt crops.

Nearby CME feeder cattle contracts fell below moving average support levels, and then funds started to liquidate.

Spot August feeder cattle closed at 154.4 cents, down 0.6 cent per pound and beneath the 10-day moving average of 154.72 cents (all figures US$).

Most-actively traded September closed 2.525 cents lower at 154.125 cents. It settled below the 40-day moving average of 155.9 cents.

October feeder cattle ended three cents lower at 155.85 cents.

Live cattle gain on report

CME live cattle closed higher after Friday’s bullish U.S. Department of Agriculture cattle-on-feed report, said traders and analysts.

The number of cattle placed in U.S. feedlots in July fell to a five-year low for the month as the smaller cattle herd and expensive feed resulted in fewer cattle for feedyards to draw from.

“The gains in cattle futures today were all about the surprisingly low placement number in Friday’s report,” a trader said.

Speculators bought deferred live cattle contracts with the view that costly-corn would cause ranchers to feed fewer animals and nourish them to lighter weights.

CME live cattle rose despite tepid wholesale beef demand and steady, rather than higher, cash cattle returns late on Friday.

Last Friday, cash cattle in Texas and Kansas moved at mostly $123 per hundredweight (cwt), and $125 in Nebraska.

U.S. packers are buying cattle for next week that will be shortened by one day because of the Sept. 2 Labour Day holiday. And grocers are close to filling their beef needs for Labour Day grilling promotions.

Monday morning, the government quoted the wholesale choice beef price, or cutout, at $195.69/cwt, down 50 cents from Friday. Select cuts fell 87 cents to $183.22.

Investors are monitoring a heat wave in the central Midwest that might discourage weekend holiday cookouts.

Spot August live cattle ended up 0.3 cent to 123.4 cents/lb. Most-actively traded October closed 0.45 cent higher at 127.15 cents.

Hogs rally as shorts cover

Mixed rather than lower cash hog prices stirred short-covering and encouraged CME hog futures buying, traders said.

Some packers raised cash hog bids to fill the rest of this week’s production schedule. The seasonal increase in supplies afforded other packers inventories into the middle of next week.

The government on Monday morning quoted the average hog price in the western Midwest market up 91 cents/cwt from Friday to $91.22, and down $1.27 to $90.44 in the eastern region.

Government data on Monday morning showed the wholesale pork price, or cutout, at $97.79/cwt, 80 cents lower than Friday.

October hogs finished 0.925 cent higher at 86.025 cents/lb. while December ended up 0.825 cent at 83.075 cents.

— Theopolis Waters reports for Reuters from Chicago.

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