U.S. livestock: Nearby cattle futures lower on profit-taking

Chicago lean hogs end mixed

CME December 2020 live cattle (candlesticks) with 20-, 50- and 100-day moving averages and October 2020 live cattle (purple line). (Barchart)

Chicago | Reuters — U.S. live cattle futures closed mixed on Thursday with nearby contracts drifting lower on profit-taking a day after the benchmark December contract touched a six-week high, analysts said.

Commodity funds hold a net long position in Chicago Mercantile Exchange (CME) live cattle futures, leaving the market vulnerable to bouts of long liquidation.

Yet brisk demand for beef underpinned values, and traders also said that market-ready cattle traded lightly in the cash market at $107/cwt, up $1-$2 from last week (all figures US$).

Packer margins for cattle were hovering around $300 per head, according to Denver-based livestock marketing advisory service HedgersEdge.com, encouraging meat packers to spend more to buy cattle from feedlots.

“The margins are there to support them paying, being able to make money while they can,” said Matthew Wiegand, a broker at FuturesOne.

Chicago Mercantile Exchange October live cattle settled down 0.025 cent at 108.525 cents/lb. and most-active December ended down 0.525 cent at 111.825 cents, a day after reaching its highest since Aug. 20.

CME November feeder cattle settled down 0.8 cent at 141.25 cents/lb.

Rising prices for corn, the main cattle feed grain, pressured CME feeder cattle futures for a second day, after the U.S. Department of Agriculture (USDA) on Wednesday reported tighter-than-expected quarterly U.S. corn stocks.

CME lean hog futures ended mixed, with the nearby October contract gaining against back months on spreads, supported by strength in the CME’s lean hog index.

“It looks like (packers) are struggling a little bit to get pigs,” Wiegand said, adding that wholesale pork prices rose on Thursday, according to USDA.

Expectations that hog supplies would ease later this year pressured the most-active December contract.

“Fourth-quarter production is normally the highest of the year,” said Alan Brugler of Brugler Marketing and Management.

CME October lean hog futures settled up 1.35 cents at 74.15 cents/lb., while most-active December hogs ended down 0.25 cent at 62.85 cents.

USDA reported export sales of U.S. pork in the week ended Sept. 24 at 39,500 tonnes, including sales of 6,500 tonnes to China. Beef export sales totaled 24,700 tonnes, including sales of 4,300 tonnes to China.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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