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April 21, 2010

 

CME hogs futures flop on profit-taking

 

 

Profit-taking dropped CME hogs Tuesday (April 20) into negative territory for the first time in four sessions.

 

The profit-taking upended lean hogs from the outset, but futures were also dogged by their bullish price premiums to CME's hog index despite robust wholesale pork sales and generally strong cash hog quotes.

 

Some in the pit believe lean hogs may be close to putting in a short-term top earlier in the spring than usual, after cash hog prices and wholesale pork values rallied over the past few months despite a seasonal tendency towards lower prices.

 

Nonetheless, market bulls are still banking that futures will hit the 90.00-cent mark within the next couple of months, carried by tight hog supplies and ramped up grilling demand.

 

While positive fundamentals cushioned the nearby May contract's fall, spreading out of most-active June into August accelerated selling in May. Also, traders later sold June hogs and bought June live cattle on spreads.

 

Spreads consist of trading two or more contracts at the same time while capitalising on the price differences between them.

 

May settled at 86.20 cents a pound, down 0.32 cent, or 0.4%. Most actively traded June closed 0.85 cents, or 1.0%, lower at 85.50 cents.

 

CME pork bellies finished mixed, with May down on profit-taking while speculative buyers motivated by futures' price discount to fresh belly values pushed up August.

 

Market participants await the CME's weekly belly storage numbers, which will be released Tuesday after 5 p.m. EDT.

 

May finished 1.25 cents, or 1.3%, lower at 97.85 cents. August closed 1.05 cents, or 1.1%, higher at 95.55 cents.

 

Meanwhile, most live cattle months at the CME landed on the plus side of the board due to short-covering and spreading into far months out of April.

 

Live cattle initially dipped after bullish traders took a step back to gauge market direction, evaluate last week's cash results and take into account this week's potential cash cattle outcome.

 

Nearby April live cattle ended down 0.27 cent, or 0.3%, at 98.67 cents a pound. Most-actively traded June closed up 0.10 cents, or 0.1%, at 94.60 cents. August ended up 0.25 cent, or 0.3%, at 92.97 cents.

 

CME feeder cattle finished lower on profit-taking and cash feeders' price setback. Some contracts were also overpriced compared with CME's feeder cattle index.

 

Nearby-April feeders ended down 0.40 cents, or 0.4%, at 111.65 cents. Most-actively traded May closed 0.50 cent, or 0.4%, lower at 112.55 cents.

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