Chicago | Reuters — Chicago Mercantile Exchange live cattle futures hit a new high on Monday, sparked by active fund buying that triggered buy stops and short-covering, traders said.
October closed up 2.85 cents per pound at 167.9 cents after earlier posting a new contract high of 167.925 cents in electronic trading (all figures US$). December finished 2.975 cents higher at 168.025 cents.
December led advances as traders simultaneously bought that contract and sold February futures in a trading strategy known as bull spreads.
Investors sometimes implemented bear spreads when they sold October, which will expire on Oct. 31, and at the same time bought December.
Futures shrugged off Friday’s modest losses, which stirred talk of at least steady prices for market-ready, or cash, cattle this week. Deteriorating packer margins and tepid wholesale beef demand might limit how much packers will spend for supplies.
Last week, cash cattle in the U.S. Plains traded mostly steady with the week before at $164 per hundredweight (cwt).
Monday morning’s choice wholesale beef price rose 64 cents/cwt from Friday to $249.80. Select dipped 11 cents to $234.67, the U.S. Department of Agriculture said.
Beef packer margins for Monday were a negative $71.50 per head, compared with a negative $71.05 on Friday and a negative $52 a week earlier, according to Colorado-based analytics firm HedgersEdge.com.
CME feeder cattle drew support from short-covering, fund buying and the live cattle market turnaround.
Futures were also underpriced based on their discounts to the exchange’s feeder cattle index for Oct. 17 at 241.84 cents, although the index has declined recently.
October, which will expire on Oct. 30, closed 2.3 cents/lb. higher at 240.75 cents, and November at 236.825 cents, up 2.675 cents.
Hogs end higher
Fallen cash hog and wholesale pork prices weighed on CME hogs futures, traders said.
December finished down 1.425 cent/lb. at 89.15 cents, and February 1.15 cents lower at 86.4 cents.
The morning’s average hog price in Iowa/Minnesota sagged $1.50/cwt from Friday in thin volume to $96.69, according to USDA.
Separate government data showed Monday morning’s wholesale pork price fell $1.66 per cwt from Friday to $109.35, led by the $5.97 drop in ham costs.
Retailers are shopping for pork at lower prices as hog supplies expand seasonally while providing extra tonnage, a trader said.
Producers are trying to beat sliding hog prices by sending them to market ahead of time, which could slow down the seasonal increase in animal weights, he said.
Bearish near-term fundamentals stirred bear spreads, which consisted of traders who sold the December contract and at the same time bought back months.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.