Chicago Mercantile Exchange hog futures prices finished more than one per cent higher on Tuesday as fund buying rallied the market from early-session lows, traders and analysts said.
They said nearby hog contracts punched through resistance levels at key moving averages, drawing the attention of fund buyers and triggering buy stops.
December hogs closed 1.45 cents per pound higher, up 1.68 per cent, at 87.8 cents. It settled above the 20-day and 10-day moving averages of 87.15 cents and 87.03 cents, respectively (all figures US$).
February finished 1.15 cents, or 1.3 per cent, higher at 89.8 cents. It ended above the 10-day and 20-day moving averages of 89.39 cents and 89.17 cents.
Higher-than-expected prices for hogs in local markets motivated futures buyers and prompted short-covering. Futures’ discount to those cash returns provided more market support.
“From a fundamental standpoint, the cash market sounds like it’s in good shape,” R.J. O’Brien hog futures trader Tom Cawthorne said.
Cattle sag on profit-taking
CME live cattle futures suffered their biggest one-day decline, 0.65 percent, in 1-1/2 months on profit taking led by sentiment that futures are overpriced based on last week’s cash cattle prices.
Last week, cash cattle in Texas and Kansas moved at mostly $128 per hundredweight (cwt), up $2 from the week before. Live-basis cattle in Nebraska a week ago traded at $127.50 to $129, $1.50 to $3 higher than the previous week.
“The $2 push in cattle prices last week was probably a little surprising. Maybe we did two weeks worth of prices in one,” U.S. Commodities analyst Don Roose said.
October futures are factoring in the possibility of a steady cash cattle trade this week, and December is at a premium to cash, he said.
Live cattle October closed 0.95 cent/lb. lower at 128.5 cents while December finished down 0.4 cent to 132.75 cents.
Improved wholesale beef prices and tight supplies may underpin cash prices, with packers mindful of their poor margins.
Estimated margins for U.S. beef packers on Tuesday were a negative $42.75 per head, compared with a negative $37.40 on Monday and negative $41.95 last week, according to HedgersEdge.com.
Data supplied by analytical market-research firm Urner Barry showed the Tuesday morning wholesale choice beef price, or cutout, at $193.95/cwt, up 67 cents from Monday. Select cuts rose 54 cents to $180.27.
Packers on Tuesday processed an estimated 122,000 head of cattle, 6,200 fewer than last year, according to Urner Barry.
CME feeder cattle fell about one per cent on lower live cattle futures and profit taking after futures’ recent spike to new highs.
October feeder cattle ended 1.675 cents/lb. lower, or one per cent, at 165.7 cents. November settled at 167.5 cents, down 1.9 cents, or 1.12 per cent.
Feeder cattle futures also felt pressure from higher corn prices. Feedlots will be reluctant to buy young cattle if corn prices trend higher.
Chicago Board of Trade corn for December delivery ended up 6-1/2 cents to $4.43-1/2 per bushel on short-covering.
“Cheap corn and the market got overextended,” said Linn Group analyst John Ginzel regarding Tuesday’s CME feeder cattle losses.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.