U.S. livestock: CME live cattle up on short-covering, fund buying

(Photo courtesy Canada Beef Inc.)

Chicago | Reuters — Chicago Mercantile Exchange live cattle settled higher on Tuesday, helped by short-covering and fund buying that halted the market’s two-session slide, traders said.

In a trading strategy known as bull spreads, some investors bought June futures and simultaneously sold deferred months in anticipation of this week’s cash prices.

Bull spreads offset CME livestock market funds that track the Standard + Poor’s Goldman Sachs Commodity Index that sold, or rolled, June futures mainly into August.

Tuesday was the second of five days for the “roll” process.

June live cattle closed 1.125 cents/lb. higher at 106.3 cents (all figures US$). August ended up 0.375 cent at 104.475 cents.

Market bulls look for packers to pay more for cattle this week given their higher margins and recent robust wholesale beef demand for spring grilling and Memorial Day barbecues.

Bearish investors believe packers purchased enough cattle in advance of a forecasted supply growth in the weeks ahead.

“We look for the packer to be patient this week thinking that by Friday, the cattle feeder will feel the pressure of unsold fed supplies and turn into a willing seller,” David Hales said in his newsletter to clients. Fed cattle are animals in feedlots available for sale to processors.

Packers in Kansas posted bids of $120/cwt for slaughter-ready, or cash, cattle versus $127 to $128 asking prices. No bids or offers were reported elsewhere in the U.S. Plains where cattle last week fetched $118-$128.

Investors await the sale of 2,380 animals at Wednesday’s Fed Cattle Exchange. Livestock there last week on average brought $122.50/cwt.

Higher CME live cattle futures underpinned the exchange’s front-month feeder cattle contracts.

May closed up 0.1 cent/lb. at 137.725 cents.

Higher hogs settlement

Strong cash prices and technical buying boosted CME lean hog futures, traders said.

Sporadic fund rolling contributed to deferred-month hog market gains, traders said.

May closed up 0.125 cent/lb. at 66.2 cents. Most actively traded June ended 2.125 cents higher at 76.3 cents, and July closed up 1.825 cents at 77.725 cents.

China has ramped up inspections of U.S. pork, importers and industry sources said.

China has not been a major U.S. pork importer for several months because of increased hog production there, said independent livestock futures trader Dan Norcini, regarding possible impact on subsequent U.S. pork exports.

— Reporting for Reuters by Theopolis Waters in Chicago.



Stories from our other publications