U.S. livestock: Live cattle post biggest daily percentage gain in a year

CME October 2016 live cattle futures as of Oct. 4, with relative strength index (RSI) chart at bottom. (Barchart.com)

Chicago | Reuters –– Chicago Mercantile Exchange live cattle futures surged about three per cent on Tuesday to their best one-day performance since October 2015, sparked by short-covering and technical buying, said traders.

Prior to Tuesday’s open, CME live cattle contracts displayed a Relative Strength Index (RSI) of 27. A RSI below 30 suggests a market is oversold and subject to an upward correction.

October live cattle ended up 2.975 cents per pound at 101.9 cents, and December 2.7 cents higher at 102.675 cents (all figures US$).

Cassandra Fish, author of industry blog The Beef, said Tuesday’s rally was powerful enough to reignite hope for cash prices later in the week and correct some of the daily chart indicators from an oversold condition.

“Weekly measurements still look negative and it is only Tuesday. But for today, the desperation of last Friday is a faded memory,” she said. Last Friday, disappointing prices for slaughter-ready, or cash, cattle and hefty meat supplies sent futures to a six-year low.

A week ago, cash cattle in the U.S. Plains fetched $103-$104/cwt versus $105-$107 in the previous week.

Plentiful supplies and packers’ reliance on cattle contracted against the futures market may pressure cash returns later in the week, said traders and analysts.

They said extremely profitable packer margins and roughly 17,000 fewer cattle for sale than last week might minimize potential cash price losses.

CME feeder cattle finished sharply higher on short-covering and live cattle futures’ rebound. October feeder cattle closed 4.025 cents per pound higher at 128 cents.

Lower hog futures close

Persistent cash price weakness, due to the seasonally building supplies, undercut CME lean hogs and pressed some contracts to new lows, said traders.

October closed down 0.3 cent/lb. to 48.625 cents, and marked a fresh low of 48.5 cents. December ended 0.675 cent lower at 43.5 cents and earlier fell to a new low of 43.3 cents.

Cash hog prices on Tuesday morning in the U.S. Midwest were 50 cents to $1/cwt lower than on Monday, said regional hog merchants.

Monday and Tuesday’s combined slaughter totaled 881,000 hogs, 12,000 more than the same period a year ago, according to USDA estimates.

Investors sold nearby hog futures, and simultaneously bought deep-deferred months, with the view that the supply glut implied by last Friday’s U.S. government hog report will have subsided by the summer of 2017.

Theopolis Waters reports on livestock markets for Reuters from Chicago.

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