Chicago Mercantile Exchange (CME) feeder cattle futures slid to a 7-1/2-month low on Tuesday, weighed by sagging live cattle futures and fund liquidation, traders and analysts said.
Weaker cash feeder cattle prices in the most-watched Oklahoma City market hastened futures’ retreat to new contract lows, they said.
“We can’t seem to get a floor under cash feeders (prices). Corn prices are still high and we can’t make any money feeding cattle,” a feedlot manager said. “It’s getting pretty darn depressing.”
Feedyards, which fatten young cattle for sale to packers, in February on average lost $197 per head compared with $175 losses in January, according to the Denver-based Livestock Marketing Information Center (all figures US$).
Prolonged drought in parts of the U.S. kept feed costs historically high, which eroded feedlot margins and curbed their demand for younger cattle.
Spot March feeder cattle ended 0.7 cent/lb. lower at 136 cents, and marked a new contract low of 135.1 cents in after-hours trading.
Most-actively traded April closed at 138.375 cents, down 1.025 cents, after drifting to a contract low of 137.375 cents.
Live cattle fade with cash hopes
CME live cattle finished lower on fund selling and expectations for possibly lower cash cattle prices, traders and analysts said.
Cash cattle bids in Kansas and Texas surfaced at $124 per hundredweight (cwt) against $127 and higher offers from sellers, feedlot sources said. Cash cattle last week fetched $126-$127/cwt.
“Packers have been able to buy cattle on their own terms the last few weeks and keeping sellers on the defensive, which wasn’t the case a couple of years ago,” KIS Futures vice-president Lane Broadbent said.
Sellers outnumbered buyers, with packers expecting to spend less for supplies for next week. The Good Friday holiday on March 29 will reduce the work week by one day, limiting packer needs for cattle.
Tepid wholesale beef demand for grilling on the eve of the official start of spring served as a sore spot for bullish futures traders.
The U.S. Department of Agriculture quoted the price for wholesale choice beef on Tuesday at $194.18/cwt, down $1.66 from Monday; select cuts slipped six cents to $193.65.
Investors said all trading months sank to new contract lows as buying interest dissipated and funds unloaded long positions, particularly in the deferred contracts.
April live cattle settled down 0.75 cent/lb. at 125.3 cents. They earlier dropped to a contract low of 124.8 in after-hours trading.
June ended 0.4 cent lower at 120.975 cents. It marked a contract low of 120.1.
CME hogs closed lower as ample supplies and sluggish wholesale pork demand prompted packers to cut most cash hog bids, analysts and traders said.
Processors will need fewer hogs during next week’s holiday-shortened work week. Some producers are sending hogs to market ahead of schedule to avoid potentially lower cash prices next week.
Futures’ premiums to the CME’s lean hog index at 76.78 cents discouraged would-be buyers. April also drifted to a contract low as traders exited the contract before it expires on April 12.
Spot April ended at 78.225 cents, 1.175 cents lower, and hit a contract low of 77.85 cents in after-hours trading.
Most-actively traded June closed down 0.675 cent at 88.275 cents.
— Theopolis Waters writes for Reuters from Chicago.