U.S. livestock: CME live cattle futures drop as funds roll positions

(CMEGroup.com)

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures on Tuesday settled lower as funds rolled their positions by selling the August contract and buying deferred months, traders said.

Funds trading in CME’s live cattle and hog markets shifted August long positions further back in a procedure known as the “roll” by followers of the Standard + Poor’s Goldman Sachs Commodity Index (S+PGSCI).

Tuesday was the first of five days for the S+PGSCI roll process.

August live cattle finished 1.425 cents per pound lower at 153.525 cents, and October down 0.7 cents to 155.975 cents.

Anticipation of steady-to-weaker prices for market-ready, or cash, cattle this week put futures buyers on the defensive.

Packers will try to avoid spending record prices for cattle that eroded their margins, traders said. Wholesale beef prices might top out soon as hot summer weather usually hurts demand, they said.

And more animals available for sale than last week could pressure cash cattle returns.

“At some point the surge in cash prices has to stop. The law of gravity has to pull it down,” said Oak Investment Group president Joe Ocrant.

Last week, cash cattle in Kansas and Texas fetched an all-time high of $158 per hundredweight (cwt).

Tuesday morning’s wholesale price for choice beef reached a record high of $250.03/cwt, surpassing Monday’s top. Select beef hit $242.82, besting Monday’s record, based on U.S. Department of Agriculture data.

Beef packer margins for Tuesday were at positive $19.50 per head, compared with a positive $31.40 on Monday and a positive $82.27 a week ago, as calculated by industry analytics firm HedgersEdge.com.

CME feeder cattle slid on profit-taking, fund liquidation and lower CME live cattle futures.

August closed 2.1 cents/lb. to 215.9, and September 1.75 cents lower at 217.475 cents.

Mostly lower hog futures close

CME July hog futures settled firm, supported by steady-to-higher cash prices as the deadly porcine epidemic diarrhea virus (PEDv) crimped supplies in the near term, traders said.

USDA’s morning direct hog market prices were unavailable. Cash hog prices in the Midwest were up by as much as $2/cwt, according to hog dealers.

The August contract slumped on sell stops and the roll by funds into back months, which also gained in anticipation PEDv-related production losses during that time frame.

July hogs closed 0.4 cent/lb. higher at 132.2. August ended 1.975 cents lower at 129.85 cents, and October down 1.55 cents to 116.3.

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

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