By Meredith Davis
CHICAGO, Feb 4 (Reuters) – Chicago Mercantile Exchange live cattle futures retreated on Tuesday, pressured by technical selling and by anticipation of softer cash prices in the near term, traders and analysts said.
The CME February live cattle contract fell below the 20-day moving average, triggering some technical selling, a trader said.
There was talk of cash cattle asking prices at $144 to $145 per hundredweight.
Last week, cattle in Texas and Kansas moved at mostly $145 per cwt., $2 lower than the week before, feedlot sources said.
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On Monday a very small number of cattle, about 300 head, sold in Texas at $142.50 per cwt, $2.50 lower than last week’s prices, feedlot sources said. The sale, while small, could indicate packers may not pay higher prices this week.
“Packers are going to be very reluctant to buy cattle in this kind of market,” said Lane Broadbent, analyst at KIS Futures. “We saw that last week when a limited number of cattle moved at these prices,” he said.
Beef packers’ profit margins, deeply in the red, may also limit the prices they pay. Margins on Tuesday were estimated at a negative $57.00 per head, compared with a negative $46.35 per head on Monday and a positive $72.70 a week ago, according to HedgersEdge.com.
Packers will likely pull forward previously contracted cattle to meet February supply needs in an effort to avoid buying at current prices, said Dominic Varricchio, commodities broker at Schwieterman, Inc.
February live cattle ended down 0.775 cents per pound at 139.600 cents, falling below the 20-day moving average of 140.228 cents. April ended down 0.500 cents at 138.900 cents, also falling below the 20-day moving average of 139.150 cents.
Strong Chicago Board of Trade corn prices and weaker live cattle futures pressured CME feeder cattle futures. U.S. corn futures rose 1.3 percent to their highest in more than three months on Tuesday.
March ended 1.025 cents lower at 166.975 cents per lb. and April ended 0.900 cents lower at 167.500 cents per lb.
CASH, WINTER WEATHER SUPPORT HOGS
CME lean hog futures were supported by the expectation of steady cash hog prices and by uncertainty regarding hog-supply availability due to extreme winter weather, traders said.
Slaughter volume has been crimped in recent weeks due to farmer cancellations and weather-induced plant closures.
An unusually heavy winter storm was blanketing Kansas with what forecasters said could be up to 10 inches of snow on Tuesday, and the storm was expected to make a quick march eastward across the U.S. Midwest and into New England.
“There could be another logistical snarl with this storm moving across the center of the country,” Varricchio said. The storm will slow down traffic on roads, stalling hog movement, he said.
“The snowstorm is the big gorilla in the room, no one knows how to interpret that right now, there are so many changes with the marketings,” a CME floor hog trader said.
Nearby futures’ premium to CME’s hog index at 82.40 cents sidelined potential buyers.
February hogs closed at 85.225 cents per lb., up 0.350 cents. April ended at 93.125 cents per lb., up 0.275 cents.
