Chicago Mercantile Exchange live cattle slumped on Thursday as eroding corn prices stirred selling that trumped initial speculative buying, traders and analysts said.
“Usually when you have back-month futures higher than the front contract, the thing that will hurt the most is if corn gets cheaper,” KIS Futures vice-president Lane Broadbent said.
Less-costly corn might prompt livestock producers to feed more cattle and hogs and nourish them to heavier weight.
Thursday morning, cash cattle lightly traded in Texas and Kansas steady with last week’s $119 per hundredweight (cwt) and short of bullish futures traders’ expectations.
Market bulls placed bets in anticipation of an uptrend in cash cattle prices, which typically happens in late July. For nearly a month, cash prices have hovered around $119 as wholesale beef demand struggled.
The U.S. Department of Agriculture on Thursday morning quoted the wholesale price of choice beef at $186.62 per cwt, down 16 cents from Wednesday. Select cuts were up 28 cents to $181.93.
Beef demand usually tapers off in hot summer weather as consumers opt for lighter meals. Grocers are seen stocking up on beef soon for the Sept. 2 U.S. Labor Day holiday, the last grilling holiday of the summer.
A Kansas meat packer has recalled 50,100 lbs of ground beef for possible E.coli contamination, USDA’s Food Safety and Inspection Service said late on Wednesday.
The news had a negligible effect on futures because of the miniscule amount involved compared to overall beef production and because no-one had become sick, analysts and traders said. Jitters about likely deliveries next week exerted more pressure on CME live cattle August.
Also, August and October futures fell below their respective 40-day moving average support levels of 121.186 and 125.016 cents, which triggered sell stops and fund liquidation.
August live cattle closed down 0.600 cent to 120.850 cents per lb and October at 124.500 cents, or 0.975 cent lower.
Lower corn prices, which could ease input costs for feedlot operators, briefly pushed CME feeder cattle to a 7-1/2-month high.
August feeders closed at 153.750 cents, up 0.325 cent per lb, and September at 157.250 cents, or 0.275 cent higher.
HOGS GAIN ON DISCOUNT
Nearby CME hogs’ discount to the exchange’s index at 100.86 cents encouraged buyers, traders and analysts said.
August closed at 98.425 cents per lb, 0.850 cent higher, and October closed at 83.900 cents, up 0.575 cent.
They said spread traders sold deferred contracts and bought nearby CME hogs as corn prices spiraled downward.
Cash hog and wholesale pork prices edged lower, which slowed futures’ advances.
The government’s data showed the average hog price Thursday morning in the eastern Midwest market at $91.13 per hundredweight, down 73 cents from Wednesday.
Thursday morning’s USDA mandatory wholesale pork price report, or cutout, was $100.78 per cwt, down 16 cents from Tuesday.
Packers who were closed on Monday for a floater holiday, with some processors scheduled to be dark on Aug. 5, will make up the downtimes on Saturday.
Tight hog supplies and retailers buying product for next month’s U.S. Labor Day holiday could convince processors to raise cash hog bids soon, a trader said.