Chicago | Reuters — Chicago Mercantile Exchange live cattle futures on Monday rose for a second straight session, helped by more short-covering and technical buying after some contracts punched through technical resistance levels, traders said.
October live cattle ended 1.3 cents/lb. higher at 105.7 cents (all figures US$). December closed 1.325 cents higher at 106.725 cents after surpassing its 10-day moving average of 105.44 cents.
On Tuesday live cattle futures will return to its normal three cents/lb. daily price limit after failing to settle at the newly expanded limit of 4.5 cents on Monday.
Live cattle futures now closely represent cash values, which attracted buyers and may cause some feedyards to hold back animals as leverage against lower prices, said Linn Group analyst John Ginzel.
“I’ve not seen confirmation from the spot market, or cash, side to indicate this thing (cash) is bottoming,” he said.
Last week, market-ready, or cash, cattle in the U.S. Plains moved at mostly $105/cwt, down from $110 to $111 the week before, said feedlot sources.
Ample cattle supplies at cheaper prices have enhanced margins for packers, offering them an incentive to process as many animals as possible, said traders.
They said ramped-up slaughters have increased beef tonnage at wholesale which, along with the end of the summer grilling season, pressured beef cutout values.
Monday morning’s choice beef price, or cutout, declined 24 cents/cwt from Friday, to $187.66. Select cuts fell 81 cents, to $181.46, according to the U.S. Department of Agriculture.
The December live cattle contract led advances on the third of five days for some funds trading in CME’s livestock markets. They shifted or “rolled” October positions into deferred months in association with the Standard + Poor’s Goldman Sachs Commodity Index (S+PGSCI).
Initial fund buying and higher live cattle futures lifted CME feeder cattle contracts. September ended 0.7 cent/lb., to 134.925 cents.
Hog market down again
CME lean hogs moved lower for a second consecutive session on continued fund rolling and profit taking, said traders.
They said investors were defensive about cash and wholesale pork values as supplies begin to grow seasonally.
“We’ve got a lot of product around us,” said Ginzel. One of the issues becomes whether farmers will expand their herds given the record-large fall corn and soybean harvest.
On Monday, packers processed 440,000 hogs, the most since 441,000 head on Jan. 1, according to USDA estimates.
— Theopolis Waters reports on livestock markets for Reuters from Chicago.