By Theopolis Waters
CHICAGO, Jan 13 (Reuters) – Chicago Mercantile Exchange live cattle posted heavy losses on Tuesday after funds kept selling February long contracts while simultaneously rolling them into back months, traders said.
Funds involved in CME’s livestock markets that follow the Standard & Poor’s Goldman Sachs Commodity Index (S&P GSCI) shifted their February positions in a procedure known as the S&P GSCI roll.
Tuesday was the fourth of five days for the S&P GSCI roll procedure.
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Fund liquidation, which is pegged to their annual rebalancing of commodity allocations and will end on Wednesday, quickly doused initial buying stirred by improved wholesale beef demand.
Tuesday afternoon’s choice wholesale beef rose $2.85 per hundredweight (cwt) from Monday to $261.63. Select were up $1.30 to $251.68, according to U.S. Department of Agriculture data.
Wholesale beef prices gained as packers charged grocers more for product to offset higher prices for slaughter-ready or cash cattle.
Last week, cash cattle in the U.S. Plains moved at $168 to $172 per cwt, feedlot sources said.
Robust wholesale beef sales may embolden feedlots to hold out for more money this week.
But, futures’ recent selloff, and moderating temperatures in the Midwest that could increase cattle weight gains, may prompt some feedyards to part with cattle at lower prices.
Live cattle February closed down the 3.000-cents per lb price limit at 157.450 cents, which will result in an expanded limit to 4.500 cents on Wednesday. April ended 2.950 cents lower at 156.400 cents.
CME feeder cattle closed lower, pressured by technical selling, live cattle market losses and sharply lower cash feeder cattle prices.
January closed down 1.850 cents per lb to 221.550 cents, and March finished 2.375 cents lower at 210.925 cents.
HOGS REPEAT 2-YEAR LOW
CME hogs fell to their lowest level in two years for a second day in a row, weighed on by additional fund rolling and rebalancing, traders said.
February closed 1.475 cents per lb lower at 75.175 cents, and April ended down 1.200 cents to 76.500 cents.
Hogs will remain plentiful until packers get through animals that backed up on farms following bouts of wintry weather in the Midwest.
Speculative buyers are poised to purchase futures in anticipation of a seasonal cash price recovery.
Nearby hog contracts are nearly in inline with the exchange’s hog index for Jan. 9 at 76.71 cents, which could attract bargain hunters.
