U.S. livestock: Bearish fundamentals halt CME live cattle rally

(Photo courtesy Canada Beef Inc.)

Chicago | Reuters –– Chicago Mercantile Exchange live cattle futures ended lower on Wednesday following softer wholesale beef values and this week’s disappointing cash prices, traders said.

The thinly traded August live cattle contract, which expired at noon CT, closed up 0.45 cent/lb. at 111.95 cents (all figures US$).

Most actively traded October and December ended 0.9 cent per pound lower at 106.575 and 108.375 cents, respectively.

Futures needed extra impetus to sustain Tuesday’s rally, which lacked fundamental support, a trader said. “There is an abundance of protein, and when cash prices came in lower this week that wasn’t helpful,” a trader said.

So far, packers in the U.S. Plains paid $110-$111/cwt for market-ready, or cash, cattle that a week ago had mostly sold for $115, feedlot sources said.

They said packers have bid $110/cwt for unsold cattle priced over $115.

Wednesday afternoon’s choice beef price slipped 13 cents/cwt from Tuesday, to $196.49. Select cuts fell $1.46, to $189.71, according to the U.S. Department of Agriculture.

Processors are buying fewer cattle because they will be closed for the U.S. Labour Day holiday on Monday, analysts and traders said. Retailers have bought almost all the meat they need to feature for the three-day holiday weekend, they added.

Technical selling and live cattle futures’ retreat sent CME feeder cattle lower. September ended two cents/lb. lower at 140.525 cents.

Higher hog futures close

CME lean hogs gained for a second straight session on month-end short-covering and futures’ discounts to the exchange’s hog index for Aug. 29 at 66.34 cents, said traders.

They said some investors had bought hog futures and sold live cattle contracts in a trading strategy known as spreading.

October ended 0.8 cent per pound higher at 62.85 cents, and December closed up 0.425 cent, to 57.525 cents.

Fund buying emerged after October and December cleared their respective 40-day moving averages of 62.19 and 57.23 cents.

Market bears were skeptical that futures’ recent run-up would last, as abundant supplies continued to pressure cash prices with a seasonal supply increase ahead.

Hogs will gain weight quicker in cooler fall-like conditions while consuming newly harvested corn, CME livestock futures trader Dan Norcini said.

The government reported that Wednesday afternoon’s average cash hog price in Iowa/Minnesota had dropped 54 cents/cwt from Tuesday, to $61.05.

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

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