CME hog futures seen mixed on negative fundamentals

 

 

Floor-traded CME hogs are seen mixed Monday (May 10) as traders weigh negative market fundamentals against positive equities developments.

 

Friday's US$0.65 per hundredweight wholesale pork carcass price drop is a bearish futures issue. And, steady-to-lower cash hog prices are expected as packers try to conserve tight margins by trimming slaughters.

 

However, June and July are still at bullish price discounts to CME's lean hog index which might stir buying into possible front-month declines. And, significant overnight stock market advances along with the dollar's tumble - both of which are tied to renewed economic confidence in Europe - could become additional underlying supportive CME hogs influences.

 

Monday is the second of five days for the current Goldman roll period that consists of funds moving some of their June long positions into July and August.  Chartwise, June straddles the 85.47-cent 20-day moving average support line. The 85.17 10-day moving average is June's next technical support opportunity.

 

CME pork belly unevenness is also anticipated featuring follow-through from July's withdrawal late last week that might encounter potential short-covering.

 

Meanwhile, a firm pit-traded CME live cattle start is expected based on front-months' price discounts to last week's cash cattle sales and supportive outside markets.

 

June and August live cattle are underpriced compared with last week's mostly US$99-100 per hundredweight cash cattle results. Fed cattle the week before brought mainly US$98-98.50.

 

Bullish floor traders are upbeat about this week's cash cattle prospects backed by the recent uptick in wholesale boxed beef values, talk of fewer cattle for sale this week and still impressive beef packer profit margins.

 

USDA's Friday evening boxed beef price data, which tracks wholesale beef values, showed choice cuts up US$0.35 per hundredweight, and select items increased US$0.07.

 

Operating margin index for beef packers for Friday was plus US$62.70 per head, compared with plus US$62.55 Thursday, according to reports.

 

Meanwhile, Tyson Foods Inc. swung to a fiscal second-quarter profit, handily topping analysts' estimates, as poultry and meat prices - including beef and pork - boosted sales amid a broad economic stabilisation.