Chicago | Reuters — Chicago Mercantile Exchange live cattle posted heavy losses on Tuesday after funds kept selling February long contracts while simultaneously rolling them into back months, traders said.
Funds involved in CME’s livestock markets that follow the Standard + Poor’s Goldman Sachs Commodity Index (S+P GSCI) shifted their February positions in a procedure known as the S+P GSCI roll.
Tuesday was the fourth of five days for the S+P GSCI roll procedure.
Fund liquidation, which is pegged to their annual rebalancing of commodity allocations and will end on Wednesday, quickly doused initial buying stirred by improved wholesale beef demand.
Tuesday afternoon’s choice wholesale beef rose $2.85 per hundredweight (cwt) from Monday to $261.63 (all figures US$). Select were up $1.30, to $251.68, according to U.S. Department of Agriculture data.
Wholesale beef prices gained as packers charged grocers more for product to offset higher prices for slaughter-ready or cash cattle.
Last week, cash cattle in the U.S. Plains moved at $168 to $172/cwt, feedlot sources said.
Robust wholesale beef sales may embolden feedlots to hold out for more money this week.
But futures’ recent selloff, and moderating temperatures in the Midwest that could increase cattle weight gains, may prompt some feedyards to part with cattle at lower prices.
Live cattle February closed down the three cents per pound price limit at 157.45 cents, which will result in an expanded limit to 4.5 cents on Wednesday. April ended 2.95 cents lower at 156.4 cents.
CME feeder cattle closed lower, pressured by technical selling, live cattle market losses and sharply lower cash feeder cattle prices.
January closed down 1.85 cents/lb. to 221.55 cents, and March finished 2.375 cents lower at 210.925 cents.
Hogs repeat two-year low
CME hogs fell to their lowest level in two years for a second day in a row, weighed on by additional fund rolling and rebalancing, traders said.
February closed 1.475 cents/lb. lower at 75.175 cents, and April ended down 1.2 cents, to 76.5 cents.
Hogs will remain plentiful until packers get through animals that backed up on farms following bouts of wintry weather in the Midwest.
Speculative buyers are poised to purchase futures in anticipation of a seasonal cash price recovery.
Nearby hog contracts are nearly in inline with the exchange’s hog index for Jan. 9 at 76.71 cents, which could attract bargain hunters.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.