U.S. livestock: CME live cattle futures slump with beef prices

Chicago | Reuters — Aside from February, Chicago Mercantile Exchange live cattle futures turned lower on Thursday, pressured by profit taking and the pullback in wholesale beef prices, traders and analyst said.

Thursday morning’s wholesale choice beef price was $238.70 per hundredweight (cwt), down $1.35 from Wednesday, snapping a 10-day run of record highs, according to U.S. Department of Agriculture data (all figures US$).

Select cuts dropped $1.43 to $236.01, ending its record streak at 14.

“The ram up of beef prices is going to shrink retail features of beef in their counters and increase sharply the featuring of pork and poultry,” said Linn Group analyst John Ginzel.

Investors who placed long bets in the market looked for a reason to sell CME live cattle futures that were overbought given its relative strength index (RSI) of 90. An RSI over 70 suggests a market is technically overbought and subject to a downward correction.

Some investors were wary of holding massive long positions in the market on the eve of Friday’s USDA’s monthly cattle-on-feed report.

Most analysts polled by Reuters believe placements of cattle in U.S. feedlots in December likely declined by 2.3 per cent from a year ago due to healthy grazing pastures.

February futures drew support from its discount to this week’s record-high cash cattle prices that were driven by tight supplies.

Cash cattle in the U.S. Plains sold up to $150/cwt, shattering last week’s $144 record, feedlot sources said.

February live cattle closed up 0.25 cent/lb. at 143.925 cents, after spiking to a new contract high of 144.575 cents in electronic trading.

April finished at 140.6 cents, 1.2 cents lower and June ended 1.3 cents lower at 132.225 cents.

CME’s live cattle market selloff and firm corn prices undercut feeder cattle futures.

January closed at 170.375 cents/lb., down 0.1 cent, while March finished at 169.875 cents, 0.5 cent lower.

Mixed hogs on spreads

CME hogs finished narrowly mixed as traders sold April futures and bought the February contract in anticipation of steady cash hog prices, a trader said.

Packing plants that were closed for Monday’s holiday will make up the downtime on Saturday.

Conversely, hogs that were held back on farms during recent bouts of harsh weather are coming to market and at heavier weights, which could keep a lid on cash returns.

June and July contracts drew support from expectations that the spread of the porcine epidemic diarrhea virus, which is deadly to baby pigs, would dent hog production during that period.

“Everyone thinks there is going to be a fair amount of PEDv problems back there. We’re just going see how that develops as we get closer,” independent hog futures trader James Burns.

February hogs closed at 85.575 cents/lb., up 0.025 cent, and April ended at 92.95 cents, down 0.025 cent.

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

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