Chicago | Reuters — Chicago Mercantile Exchange lean hogs on Thursday sank to their lowest level since March 2013 on liquidation by funds as part of their annual rebalancing of commodity positions, traders said.
Funds trading in CME’s lean hogs and live cattle markets simultaneously sold February long positions and bought back months in a procedure known as the “roll” by followers of the Standard + Poor’s Goldman Sachs Commodity Index (S+PGSCI).
Thursday was the first of five days for the S+PGSCI roll process.
Speculative buyers waited for signs of a seasonal bottom in prices for market-ready or cash hogs as packers work through animals that had backed up on farms during the New Year’s holiday.
On Thursday morning, the average price of cash hogs in the Iowa/Minnesota market had dropped 78 cents per hundredweight (cwt) from Wednesday to $73.37, the U.S. Department of Agriculture said (all figures US$).
February closed 1.15 cents per pound lower at 78.175 cents, and April finished down 1.925 cents, to 79.95 cents.
CME live cattle fall
CME live cattle posted steep losses, and had fallen by its three-cents/lb. daily limit in electronic trading, led by fund liquidation that overshadowed initial fundamental support, traders said.
Fund selling accelerated after February and April drifted below their respective 100-day moving averages of 163.37 cents and 162.35 cents.
Pit-traded live cattle February and April ended 2.3 cents lower at 163.6 cents and 162.425 cents, respectively.
This week, market-ready or cash cattle in the U.S. Plains sold at $168-$172/cwt, up from $166 to $169 last week, feedlot sources said.
The morning’s choice wholesale beef price climbed $2.26/cwt from Wednesday to $255.01. Select cuts jumped $3.34 to $245.46, according to USDA.
Wintry weather tightened supplies for packers who had not bought enough cattle for plants that returned to normal operations after the New Year’s holiday.
Grocers featuring beef through the middle of February are paying more for it after packers increased costs to compensate for high-priced cattle.
Thinly traded CME feeder cattle felt pressure from technical selling and heavy live cattle losses, which sank electronic deferred months by their 4.5-cent price limit.
Pit-traded feeder cattle January closed down 0.025 cent/lb. to 225.625 cents, March 3.275 cents lower at 217.05 cents, and April finished down 3.725 cents to 216.425 cents.
— Theopolis Waters writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.