CHICAGO, Oct 4 (Reuters) – Chicago Mercantile Exchange live cattle futures surged about 3 percent on Tuesday to their best one-day performance since October 2015, sparked by short-covering and technical buying, said traders.
Prior to Tuesday’s open, CME live cattle contracts displayed a Relative Strength Index (RSI) of 27. A RSI below 30 suggests a market is oversold and subject to an upward correction.
October live cattle ended up 2.975 cents per pound at 101.900 cents, and December 2.700 cents higher at 102.675 cents.
Cassandra Fish, author of industry blog The Beef, said Tuesday’s rally was powerful enough to reignite hope for cash prices later in the week and correct some of the daily chart indicators from an oversold condition.
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As the harvest in southern Alberta presses on, a broker said that is one of the factors pulling feed prices lower in the region. Darcy Haley, vice-president of Ag Value Brokers in Lethbridge, added that lower cattle numbers in feedlots, plentiful amounts of grass for cattle to graze and a lacklustre export market also weighed on feed prices.
“Weekly measurements still look negative and it is only Tuesday. But for today, the desperation of last Friday is a faded memory,” she said. Last Friday, disappointing prices for slaughter-ready, or cash, cattle and hefty meat supplies sent futures to a 6-year low.
A week ago, cash cattle in the U.S. Plains fetched $103 to $104 per cwt versus $105 to $107 in the previous week.
Plentiful supplies and packers’ reliance on cattle contracted against the futures market may pressure cash returns later in the week, said traders and analysts.
They said extremely profitable packer margins and roughly 17,000 fewer cattle for sale than last week might minimize potential cash price losses.
CME feeder cattle finished sharply higher on short-covering and live cattle futures’ rebound. October feeder cattle closed 4.025 cents per pound higher at 128.000 cents.
Persistent cash price weakness, due to the seasonally building supplies, undercut CME lean hogs and pressed some contracts to new lows, said traders.
October closed down 0.300 cent per pound to 48.625 cents, and marked a fresh low of 48.500 cents. December ended 0.675 cent lower at 43.500 cents and earlier fell to a new low of 43.300 cents.
Cash hog prices on Tuesday morning in the U.S. Midwest were
50 cents to $1 per cwt lower than on Monday, said regional hog merchants.
Monday and Tuesday’s combined slaughter totaled 881,000 hogs, 12,000 more than the same period a year ago, according to USDA estimates.
Investors sold nearby hog futures, and simultaneously bought deep-deferred months, with the view that the supply glut implied by last Friday’s U.S. government hog report will have subsided by the summer of 2017.
