CME live cattle futures slump; cash prices disappoint

CHICAGO, Oct 12 (Reuters) – Chicago Mercantile Exchange live cattle on Thursday reversed some of their recent gains, pressured by profit-taking following this week’s initial cash prices that fell short of expectations, said traders.

To avoid cattle deliveries, some investors sold the October contract either outright or simultaneously bought deferred months in a trading strategy known as bear spreading.

October live cattle finished 1.425 cents per pound lower at 112.350 cents, and December closed 1.250 cents lower at 117.275 cents.

On Thursday morning a small number of slaughter-ready, or cash, cattle in the southern U.S. Plains brought $111 per cwt, said feedlot sources. That was up as much as $2 from last week, but $1 less than what some traders had anticipated.

Cash bids for remaining cattle were at $108 to $110 per cwt against sellers holding out for $113, said feedlot sources.

Packers created market uncertainty by initially bidding $108 per cwt early on Thursday, suggesting they had ample inventories, only to turn around and pay $111 later in the day, said Top Third Ag Marketing broker Jeff French.

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He also attributed Thursday’s futures losses to the technically overbought market and uneasiness about U.S. beef exports if ongoing NAFTA talks prove unsuccessful.

“As a nation, we sell 14 percent of the beef we produce on the world market. We’re talking big numbers,” said French.

Thursday’s wholesale beef values snapped back from Wednesday’s setback, an indication of erratic demand as retailers feature pork during October National Pork Month.

Profit-taking, firmer corn prices and live cattle futures’ selloff dragged down CME feeder cattle contracts.

October ended 0.600 cent per pound lower at 153.550 cents.

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CME lean hogs drew pressure from fund liquidation and selling in the exchange’s neighboring live cattle market, said traders.

Profit-taking and hog futures’ premiums to CME’s hog index for Oct. 10 at 58.32 cents contributed to the market’s bearish tone despite supportive cash and wholesale pork prices, they said.

October hogs, which will expire on Friday, ended 0.550 cent per pound lower at 60.700 cents. Most actively traded December finished 0.875 cent lower at 61.625 cents, and below the 200-day moving average of 61.782 cents.

Record daily hog slaughters at higher prices suggest new packing plants are competing for hogs, a trader said. But grocers may soon curtail Pork Month advertisements while considering promoting beef in early November, he added.

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  • bufford54

    “A trade strategy known as bear spreading”? Is that the same as, “sticking it to the producers”? No wonder the retail price of red meat is more than double the farmgate price.