CHICAGO, Jan 4 (Reuters) – Chicago Mercantile Exchange live cattle futures on Wednesday reversed the prior day’s losses, with strength from technical buying and short covering, said traders.
February live cattle closed 0.800 cent per pound higher at 115.675 cents. April ended up 0.775 cent at 114.725 cents and above the 10-day moving average of 114.547 cents.
Funds have huge long futures positions, which means they may continue defending them or cause a steep decline when they try to get out of the market, said Oak Investment Group President Joe Ocrant.
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Futures’ discounts to early-week prices for slaughter-ready, or cash, cattle contributed to market advances, said traders and analysts.
On Wednesday, a small volume of cash cattle in Nebraska traded at $116 to $116.50 per cwt, which was down from mostly $118 in the U.S. Plains last week, said feedlot sources.
And Wednesday morning’s Fed Cattle Exchange yielded $115.50 to $117.25 per cwt sales, compared with mostly $115 to $116.75 last week.
Ample packer inventories and about 23,000 more cattle for sale than last week may weigh on prices for remaining animals in the Plains, said traders.
They added, however, that improved wholesale beef demand and still profitable packer margins might limit potential cash price losses.
Wednesday morning’s choice and select wholesale beef prices jumped $1.51 per cwt from Tuesday to $204.84 and $195.08, respectively, the U.S. Department of Agriculture said.
Sell-stops, fund liquidation and firmer corn prices pressured CME feeder cattle futures.
January feeders closed 1.700 cents per pound lower at 128.500 cents, after slipping below their 20-day moving average of 129.245 cents.
Short covering and fund buying helped CME lean hogs partially recover from Tuesday’s selloff, said traders.
February hogs ended 1.100 cents per pound higher at 64.600 cents, and April was up 1.075 cents at 67.975 cents.
Both contracts settled above their respective 10-day moving averages of 64.557 and 67.110 cents.
Still, some investors seem poised to sell futures based on their premiums to CME’s hog index for Dec. 30 at 57.47 cents, cash price uncertainty and the morning’s wholesale pork price setback.
Wednesday morning’s wholesale pork price dropped 99 cents per cwt from Tuesday to $79.55, the USDA said.
The government’s Wednesday morning direct cash hog data was unavailable due to insufficient packer participation in reporting prices.
