U.S. livestock: Technical selloff upends CME live cattle futures

Photo: Canada Beef Inc.

Chicago / Reuters – Chicago Mercantile Exchange live cattle contracts closed sharply lower on Tuesday, undercut by technical-related selling that wiped out Monday’s gains, traders said.

They said August futures led losers after investors periodically sold that contract and simultaneously bought deferred months in a trading strategy known as bear spreading.

August live cattle ended 2.050 cents per lb lower at 110.400 cents, below the 10-day moving average of 111.28 cents. October closed 1.150 cents lower at 109.475 cents.

By Friday investors look for packers to pay about the same for market-ready, or cash, cattle as last week.

“Packers bought cattle on their own terms the last couple weeks, and it looks like they’re going to kind of have their way again this week,” said KIS Futures Vice President Lane Broadbent.

But a few processors may have tipped their hand that they are short on supplies by bidding for cattle on a Tuesday rather later in the week, a trader said.

Furthermore, Tuesday’s beef cutout price upturn, highly profitable packer margins and the threat of hot weather delaying delivery of animals to packers are supportive cash price influences.

On Tuesday, cash bids cropped up in Kansas at $115 per cwt, said feedlot sources. Sellers have not priced their cattle that last week in the U.S. Plains brought $117.

The morning’s choice beef price was up 24 cents per cwt to $202.81 from Monday. Select cuts rose $1.34 to $192.45, the U.S. Department of Agriculture said.

Fund liquidation and live cattle market losses weighed on CME feeder cattle contracts. August feeders closed 1.275 cents per lb lower at 139.900 cents.

Hog futures end lower

Slumping cash hog prices and spillover from CME’s cattle market selling sent the exchange’s lean hog trading months lower, said traders.

August hogs finished down 0.475 cent per lb to 77.350 cents, and October ended 1.075 cents lower at 64.300 cents.

USDA reported Tuesday morning’s average cash hog price in Iowa/Minnesota had fallen 66 cents per cwt from Monday to $74.55 in light sales volume.

Most packers have enough hogs to accommodate near-term slaughter schedules, but a few others might need to fill gaps in inventories through the balance of the week, said Midwest hog merchants.

They said supermarkets may be buying pork for immediate needs in the event Midwest weekend forecasts for extreme heat limits the number of hogs available to packers.

Editing by Leslie Adler

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