CME hog futures soften on profit-taking

 

 

Profit-taking and bearish influences from outside markets undercut most CME hog prices Tuesday (May 4).

 

Lean hogs initially pulled back when investors bolted for the US dollar as a safe haven against Europe's mounting debt concerns. Those worries at one point knocked the stock market 2.5% from its morning high.

 

Consumer jitters about financial market instability might prompt them to turn to cheaper meat alternatives in lieu of high-end pork cuts. Also, the dollar's surge may cause US pork importers to curtail near-term product purchases.

 

Nonetheless, generally steady-to-better cash hog quotes and renewed wholesale pork interest not only cushioned the fall in futures fall but landed spot-May in positive trading territory.

 

May also eked out a new contract high with the help of spreading into the contract out of August. Traders also sold distant months and bought June on spreads.

 

Spreads involve trading two are more months simultaneously while capitalising on the price differences between them.

 

Spot-May settled at 90.02 cents a pound, up 0.20 cent, or 0.2%. Most-actively traded June closed down 0.17 cent, or 0.2%, at 86.75 cents. July finished down 0.22 cent, or 0.3%, at 87.15 cents.

 

CME pork bellies closed higher as traders adjusted positions in anticipation of CME's weekly belly storage report at 5 p.m. EDT Tuesday.

 

May finished 1.47 cents, or 1.5%, higher at 101.20 cents. July closed 1.00 cent, or 1.0%, higher at 100.50 cents.

 

Meanwhile, front-end CME live cattle finished above board because of their price discounts to recent cash cattle sales. Other months, however, lagged due to spreads and burdensome broader market issues.

 

Profit-taking and uncertainty about cash cattle's price direction pulled down futures immediately after the open. But, it was the plunge in stocks and the dollar's significant bounce that caught the eye of cattle market participants.

 

The dollar's precipitous rise means reduced US beef purchases by foreign buyers. However, June and August selling abated after both months held above their 10-day moving average support levels. Speculative buyers were also encouraged by word of more US$98-per-hundredweight cash cattle sales Tuesday.

 

Cash prices so far are steady to weak compared with last week's mostly US$98-98.50 trade. But, those with a positive view of the market remained upbeat about June and August because they were undervalued based on cash quotes.

 

Subsequent spot-June and nearby-August buying carried both months beyond Monday's highs, where pre-placed orders to buy were waiting. Spreading into August out of February pushed August to a new contract high by day's end.

 

Spot-June live cattle closed 0.50 cent, or 0.5%, higher at 96.02 cents a pound. Nearby August finished up 0.20 cent, or 0.2%, at 95.15 cents.

 

Feeder cattle ended mixed on spreading out of August into May and live cattle's two-sided settlement.

 

Spot-May feeders ended up 0.02 cent, or 0.02%, at 113.42 cents. Most-actively traded August finished down 0.05 cent, or 0.04%, at 116.60 cents.