Chicago Mercantile Exchange live cattle futures closed lower on Friday as traders adjusted positions ahead of the U.S. Department of Agriculture monthly cattle-on-feed report that was released after the futures closed, analysts and traders said.
Analysts called the report neutral for futures on Monday as its supply numbers were nearly in line with trade estimates.
“We pressed the market all week so we have to see how much of the report is dialed in,” said U.S. Commodities analyst Don Roose.
Ideas that cash cattle and wholesale beef prices are near their seasonal peak generated more selling in CME live cattle futures’ selling.
Cattle also were pressured by CME lean hogs, which slumped after USDA’s National Veterinary Services Laboratories detected porcine epidemic diarrhea (PEDV) in Iowa’s hog herd.
The virus is not a food safety concern and does not affect humans, a USDA spokesman said.
“I think uncertainty for both markets, cattle and hogs, suggests traders were spooked by what at first was a rumour about the hog disease,” a trader said.
CME live cattle extended their weekly losing streak to three after finishing down 0.87 per cent for the week.
June cattle closed at 119.4 cents, down 0.5 cent/lb. and set a contract low of 118.7 cents in after-hours trading (all figures US$).
August ended 1.175 cents lower at 118.55 cents before drifting to a contract low of 118.375 cents in after-hours trading.
Despite record-setting wholesale beef values and profitable margins, packers resisted paying up for cattle given futures’ steep discount to recent cash returns.
This week, cash cattle in the U.S. Plains traded at $124 to $125/cwt versus mostly $126 to $127 last week, said feedlot sources.
USDA wholesale price of choice beef, or cutout, on Friday was $209.51/cwt, surpassing the previous record of $208.99 set Thursday morning.
U.S. beef packer margins on Friday were estimated at a positive $69.80 per head, compared to a positive $67.15 on Thursday and a positive $36.25 a week ago, according to HedgersEdge.com.
Feeder cattle futures closed in tandem with the lower live cattle market.
CME feeder cattle ended the week down 0.65 per cent, losing ground for a third consecutive week.
May feeder cattle settled at 133.9 cents, down 1.125 cents/lb. It drifted to a contract low of 133.525 cents in after-hours trading.
August settled at 143.375 cents, 1.75 cents lower and set a contract low of 143.075 cents.
Hogs slump amid pig virus
CME hog futures settled lower on profit taking and the PEDV pig virus outbreak in Iowa, said traders and analysts.
The selloff sank June and July futures below key moving averages, triggering further speculative selling and fund liquidation.
“We haven’t run into that much of it (PEDV) as far as an issue, so I’m trying it figure out why it popped up today,” said Roose.
He said the hog disease was not a “big talking point” in the futures market but that uncertainty about its potential impact prompted selling.
A trader said some investors sold nearby hog contracts and bought deferred months. They believe the disease might prompt producers to sell hogs ahead of schedule resulting in fewer supplies later in the year.
“The market was already under pressure in anticipation of cash hogs and pork prices putting in a seasonal top soon. Packers are also trying to reverse margin losses by cutting kills,” he said.
CME hogs ended 0.52 per cent lower for the week, breaking a five-week win streak.
June hogs settled 1.350 cents lower to 91.525 cents/lb. It closed just shy of the 20-day moving average at 91.53 cents.
July closed at 90.975 cents, or 1.575 cents lower, and below the 40-day moving average of 91.11 cents.
The government’s Friday afternoon mandatory wholesale pork price, calculated on a plant-delivered basis, was $93.48/cwt, up 12 cents from Thursday.
The average hog price on Friday in the most-watched Iowa/Minnesota market was $89.43/cwt, 80 cents lower than on Thursday.
— Theopolis Waters reports for Reuters from Chicago.