U.S. livestock: Active fund selloff extends CME live cattle losses

(Photo courtesy Canada Beef Inc.)

Chicago | Reuters — Chicago Mercantile Exchange live cattle fell for a seventh straight session on Wednesday as funds liquidated positions in association with their yearly rebalancing of commodities, traders said.

Funds involved in CME’s livestock markets that follow the Standard + Poor’s Goldman Sachs Commodity Index (S+P GSCI) sold, or “rolled,” their February long positions into back months in a procedure known as the S+P GSCI roll.

Wednesday was the last day for fund rebalancing and the S+P GSCI roll procedure.

Live cattle February closed 1.7 cents per pound lower at 155.75 cents, and April 2.075 cents lower at 154.325 cents (all figures US$).

February and April dropped below the 200-day moving average support levels of 156.49 and 156.12 cents, which triggered more fund selling.

Fundamental traders are banking on a market rally driven by improved packer margins and solid wholesale beef demand.

Wednesday morning’s choice wholesale beef rose $2.20 per hundredweight (cwt) from Tuesday to $263.83. Select were up $1.92 to $253.60, the U.S. Department of Agriculture said.

Last week, cash cattle in the U.S. Plains moved at $168-$172/cwt.

Beef packer margins for Wednesday were a negative $40.10 per head, compared with a negative $57.30 on Tuesday and a negative $80.70 a week earlier, according to Hedgersedge.com.

This week’s cash prices are shrouded in uncertainty given higher wholesale beef values and futures prices at current price levels.

CME feeder cattle were weakened by live cattle market losses, technical selling and lower cash feeder cattle prices.

January closed down 1.4 cents/lb. to 220.15 cents, and March 0.825 cents lower at 210.1 cents.

Hogs up from two-year low

CME hogs closed one per cent higher on short-covering and bargain hunting after futures slumped to a two-year low on Monday and Tuesday.

February closed 0.85 cents/lb. higher at 76.025 cents, and April up 1.5 cents, to 78 cents.

Investors are anticipating a seasonal cash price rebound after packers clear a backlog of heavyweight hogs delayed by farmers because of wintry weather.

Slaughter hog prices in the Midwest on Wednesday morning sold steady to 50 cents/cwt lower than on Tuesday, regional hog dealers said.

Pork may attract shoppers looking for a less expensive alternative to relatively high-priced beef, a trader said.

Wednesday morning’s wholesale pork price was up 13 cents/cwt from Tuesday to $84.49, USDA said.

— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.

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