U.S. livestock: Technical buying rallies CME live cattle

(Photo courtesy Canada Beef Inc.)

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures on Tuesday reversed some of Monday’s losses, aided by short-covering and technical buying, traders said.

Prior to Tuesday’s session, CME live cattle showed a Relative Strength Index (RSI) of 28. A reading below 30 suggests a market is technically oversold and subject to an upward adjustment.

June live cattle closed up 0.55 cent/lb., to 115.05 cents, and August ended 1.2 cents higher at 111.45 cents (all figures US$).

Some investors bought the June contract because of its discount to initial sales of market-ready, or cash, cattle in Kansas of $116-$117/cwt. That was down from mostly $121 last week.

The bulk of cash cattle in the U.S. Plains a week ago brought $119-$125/cwt.

“Today’s cash trade comes a little closer to justifying June futures,” said Oak Investment Group president Joe Ocrant.

Investors are waiting for the sale of remaining cattle later this week against the backdrop of highly-profitable packer margins, tepid wholesale beef demand and slightly less animals for sale than last week.

Beef packer margins for Tuesday, on average, were a positive $79.25 per head, up from a positive $46.65 on Monday, as calculated by HedgersEdge.com.

The morning’s choice beef price was at $217.81/cwt, $1.76 lower than on Monday. Select cuts rose 22 cents, to $199.60, the U.S. Department of Agriculture said.

Corn futures’ tumble and higher live cattle futures boosted CME feeder cattle contracts. August feeders closed 2.6 cents/lb. higher at 139.275 cents.

Weak hog futures settlement

The morning’s steep cash price drop and CME lean hog futures’ premiums to the exchange’s index for June 17 at 82.92 cents weighed on contracts, traders said.

Most-active July ended down 0.225 cent/lb. to 86.2 cents, and August closed 0.475 cent lower at 88.475 cents.

USDA reported Tuesday morning’s average cash hog price in Iowa/Minnesota had fallen $3.13 per cwt from Monday to $80.77 in light sales volume.

Single-digit profits for packers convinced them to lower cash bids and scale back slaughters, despite seasonally tight supplies and good wholesale pork demand, a trader said.

Tuesday morning’s wholesale pork price gained 35 cents/cwt from Monday to $88.25/cwt, USDA said.

HedgersEdge estimated Tuesday’s average pork packer margins at $7.80 per head, up from $6.40 on Monday and down from $10.60 a week ago.

— Theopolis Waters reports on livestock markets for Reuters from Chicago.

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