April 4, 2013

 

 

Following the recent gains that were prompted by a steep drop in corn futures the past few days, Chicago Mercantile Exchange (CME) live cattle and feeder cattle futures fell on Tuesday (Mar 26) on profit-taking.

 

Traders said much of the activity in the cattle futures market was technical and said volatility should have been expected because the market had been overbought.

 

"We had a pretty good rally and it (April cattle) was not able to get above resistance in the US$129 area. That brought in a lot of local selling," a CME floor trader said.

 

Strong cash cattle markets in the Plains feedlot region late last week had helped underpin live cattle futures as did firm wholesale beef markets.

 

The feeder cattle market had soared since the release last Thursday (Mar 28) of a US government report showing much larger US corn supplies than expected. The plunge to nine-month lows in corn led to speculative buying of feeder cattle futures on prospects that lower feed costs would boost demand for young cattle to put in feedlots.

 

"Cattle have had a nice, nice boost from feeders that got support from the breakdown in corn but the market is not quite there seasonally yet," said Sterling Smith, market specialist for Citigroup. "Technically, cattle have to go back down and test support at US$122.25 in the June contract," Smith said.

 

CME live cattle for April delivery were down US$0.01325 on Tuesday at US$1.27425 per pound. June was down US$0.01275 at US$1.22825.

 

"A holding pattern is about right for cattle futures. I do not see cattle going much higher until we get some seasonal demand showing up," said Dennis Smith, a broker for Archer Financial.

 

CME feeder cattle futures for April delivery closed down US$0.008 at US$1.44725 per pound. May was down US$0.00575 at US$1.471. Declines in feeder cattle were slowed by another sag in Chicago Board of Trade (CBOT) corn futures.

 

The estimated margins for US beef packing companies was a negative US$31.05 per animal on April 2, compared with a negative US$33.85 on April 1 and a minus US$14.80 a week ago, according to Denver-based livestock marketing advisory service HedgersEdge.com LLC.

 

USDA's wholesale boxed beef report early on Tuesday (Mar 26) showed choice beef up US$1.22 at US$191.75 per cwt and select was up US$1.05 at US$189.36. Lean hog futures were mixed with profit-taking and local selling weighing on nearby months but the market was underpinned by firm cash markets.

 

"Hogs are looking better with resistance at US$92 broken in the June contract. It needs to clear that level for the next three sessions and if it does there is a new range of US$92-96," Citigroup's Smith said.

 

CME lean hogs for April delivery were down US$0.0035 per pound at US$0.8095. May was down US$0.0005 per pound at US$0.8995.

 

Cash hog markets in the US Midwest were US$1 per hundredweight (cwt) higher on Tuesday as the supply continued to tighten on better demand, dealers said. Estimated average margin for US pork packing companies was a positive US$2.50 per animal on Tuesday, compared with a negative US$4.55 on Monday and a positive US$9.70 on March 25.

 

The CME lean hog index for the two days ending on March 29 was US$0.7556 and for the two days ending March 28 it was US$0.7521.