By Theopolis Waters
CHICAGO, Oct 28 (Reuters) – Chicago Mercantile Exchange live cattle closed weaker on profit-taking and October selling ahead of its expiration on Friday, traders said.
October closed 0.350 cent per pound lower at 169.200 cents. December, the next lead month after October expires, was down 0.050 cent at 167.775 cents.
In a trading strategy known as bull spreads, traders simultaneously sold back months and bought December futures in anticipation of steady or better cash prices this week.
Even though more animals are available now, packers are thought to need cattle after buying fewer of them at a record-high $170 per cwt last week.
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U.S. livestock: CME cattle futures hit new contract highs as supplies tighten
Chicago Mercantile Exchange live and feeder cattle futures rallied to fresh contract highs on Wednesday, as tight supplies and strong cash market prices continued to send future contracts surging, market analysts said.
Last week’s record cash prices convinced ranchers and feedlots to pull cattle off pastures and put them up for sale, a trader said.
Processors charged grocers more for beef to shore up their sagging margins and offset the high cost for cattle.
Grocers may be booking small amounts of steaks and roasts to compete with hams and turkeys during the fall and winter periods, another trader said.
Tuesday morning’s Choice wholesale beef price rose $2.40 per hundredweight (cwt.) from Monday to $251.60. Select surged $3.21 to $239.20, the USDA said.
CME feeder cattle futures sagged on profit-taking, back-month live cattle market selling and steady to $2 per cwt lower prices for feeder cattle in local markets.
October, which will expire on Thursday, closed down 0.050 cent per lb. at 238.275 cents per lb. November, the soon-to-be lead month, ended 1.150 cents per lb lower at 233.650 cents.
SHORT COVERING LIFTS HOGS
Lean hogs closed higher on Tuesday, supported by short-covering and speculative buying after recent market losses, traders said.
December finished 1.150 cents per lb. higher at 90.200 cents, and February was up 1.075 cents at 89.300 cents.
Fund buying surfaced after the December contract broke through the 10-day moving average of 89.83 cents. Back months moved beyond Monday’s highs, which triggered buy stops.
Futures gained despite deteriorating market-ready or cash hog prices and the morning’s wholesale pork cutout value relapse.
Tuesday morning’s average hog price in Iowa/Minnesota dropped $1.96 per cwt. from Monday to $86.49, the U.S. Department of Agriculture said.
Separate USDA data showed the morning’s wholesale pork price, or cutout, slumped $2.61 per cwt. from Monday to $97.50, after packers cut ham and loin costs.
Seasonally abundant supplies pulled down cash prices and increased the availability of pork to retailers.
“It should be interesting to see how investors respond to this afternoon’s USDA cash and wholesale pork prices during the new shorter screen trading session,” another trader said.
Monday was the first full day that the CME implemented reduced Globex livestock market trading hours.
