Profit-taking undercuts CME live cattle futures

CHICAGO, Nov 6 (Reuters) – Chicago Mercantile Exchange live cattle closed lower on Monday, hit by profit-taking after last week’s sharply higher cash prices drove some trading months up by their 3-cents per pound daily price limit on Friday.

Funds “rolled” the December contract and simultaneously bought deferred ahead of similar moves on Tuesday.

Tuesday is the first of five days when funds in CME’s livestock markets that follow the Standard & Poor’s Goldman Sachs Commodity Index sell, or “roll,” December long positions mainly into February and April contracts.

December live cattle finished 1.975 cents per pound lower at 125.325 cents, and February ended 1.100 cents lower at 130.650 cents.

Live futures will resume its normal 3-cent trading limit on Tuesday after failing to close up or down Monday’s 4.500-cent expanded limit.

Potential investors may be content to observe the roll from the sidelines while waiting for this week’s cash cattle trade to develop.

“I’d imagine people are sitting back given the fact that nobody knows, with a whole lot of confidence, anything in this cattle market,” said Allendale Inc chief strategist Rich Nelson.

Packers last week paid $122 to $126 per cwt for slaughter-ready, or cash, cattle in the U.S. Plains. That was up as much as $10 from the week before, thanks to improved wholesale beef prices and good packer profits.

However, those strong cash prices trimmed packer profits that, along ample supplies of cattle contracted against the futures market, threaten this week’s cash returns.

Live cattle futures selling and investors pocketing profits pressured CME feeder cattle. Higher cash feeder cattle prices limited futures losses.

November feeder cattle closed down 0.725 cent per pound at 160.150 cents.

Slumping cash prices and Monday morning’s soft wholesale pork values weighed on the December CME lean hog contract, said traders.

They said the roll by funds further pressured December futures but supported deferred contracts.

December hogs ended 0.475 cent per pound lower at 64.625 cents. February closed up 0.250 cent at 72.225 cents and April finished up 0.150 cent to 75.600 cents.

Futures appear to be holding up well despite the recent cash price decline as packers work to grow their margins, a trader said.

More hogs should come to market after farmers wrap up harvesting corn and soybeans soon, a Midwest hog merchant said. Animals weights should increase as more palatable, nutrient rich new-crop corn enters feed rations, he added.

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