By Theopolis Waters
CHICAGO, Feb 3 (Reuters) – Chicago Mercantile Exchange hog futures retreated on Monday, led by profit-taking in anticipation of weaker cash prices in the near term, traders and analysts said.
The morning’s average cash hog price in the eastern Midwest dropped $1.14 per hundredweight (cwt) to $78.71, according to U.S. Department of Agriculture data.
Investors look for most hog prices in the Midwest to decline as processors work through supplies that had been delayed by several weeks of harsh weather, a trader said.
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However, a few packers may maintain at least steady cash bids to ensure themselves of supplies for the rest of this week’s production, he said.
Selling in the neighbouring CME live cattle pit spilled over into hog futures.
“Part of our support last week was because cattle acted so strong at that time,” said independent hog futures trader James Burns.
Nearby futures’ premium to CME’s hog index at 82.16 cents sidelined potential buyers.
Fund selling developed after the February and April contracts fell below moving-average support levels.
February hogs closed at 84.875 cents per pound, down 1.350 cents. It ended below the 20-day and 10-day moving averages of 85.963 cents and 85.830 cents.
April ended at 92.850 cents, 1.950 cents lower and beneath the 10-day moving average of 93.530 cents.
CATTLE BOW TO BEEF PRICES
CME live cattle slumped as eroding wholesale beef prices wore down packer margins while threatening cash prices for this week, traders said.
The morning’s wholesale choice beef price was $220.26 per cwt, down $3.23 from Friday and $18.05 lower than a week ago. Select cuts tumbled $5.28, and fell $19.05 from last week, to $219.57, according to USDA.
Last week, cattle in Texas and Kansas moved at mostly $145 per cwt, $2 lower than the week before, feedlot sources said. Cash cattle in Nebraska dropped $4 from last week’s record high in the U.S. Plains of $150, they said.
Beef packer margins for Monday were estimated at a negative $46.35 per head, compared with a positive $12.30 per head on Friday and a positive $68.45 a week ago, as calculated by HedgersEdge.com.
“Packers paid less for cattle, but the drop in the beef market overwhelmed what they make on their margins,” said Oak Investment Group President Joe Ocrant.
Funds that actively sold U.S. equities liquidated some of their CME live cattle futures assets, he said.
February live cattle closed 1.300 cents per lb. lower at 140.375 cents.
April ended down 1.025 cents to 139.400 cents and drifted below the 10-day moving average of 140.460 cents.
CME feeder cattle felt pressure from live cattle futures’ losses and firm corn prices.
March ended 1.425 cents lower at 168.000 cents,
and April finished down 1.275 cents to 168.400 cents.
