CME cattle futures beef up on stock market surge

For a second straight session CME live cattle landed in positive trading territory Thursday (May 27), thanks to another stock market surge.

Positive domestic and overseas economic news sent a 2% upward tear and pulled the rug from under the dollar. Renewed consumer confidence in the economy could enhance demand for high-end beef cuts, while the lower dollar typically bodes well for exports in general.

Live cattle was off and running after short-covering that was partly behind Wednesday's advances carried over into Thursday. Speculative traders were also drawn to futures that were undervalued compared with recent cash cattle returns - even though those prices have underperformed lately.

Cash-basis cattle so far this week changed hands at US$93-94 per hundredweight. Floor-traded cattle strength and profitable beef packer margins inspired other feeders to ask for more money. Cash cattle last week sold for mostly US$96-98 versus generally US$100 the week before.

However, processors may balk at that notion because they need fewer cattle ahead of the Memorial Day holiday and as boxed beef prices continue to fade.

The USDA midday Thursday boxed beef data, which reflects beef prices at the wholesale level, showed choice cuts slid another US$1.12 cents a pound, and select items sank an extra US$1.49.

Nonetheless, August attracted fund buying interest and tripped pre-established buy orders after it overcame its 100-day moving average resistance obstacle.

Spreading into August out of June and October was common during the session. Spreads involve buying two or more contracts simultaneously while taking advantage of the price differences between them.

Spot-June live cattle closed up 0.77 cent a pound, or 0.8%, at 91.57 cents. Most actively-traded August finished 0.85 cent higher, or 0.9%, at 90.77 cents.

CME feeder cattle ended firm on residual buying from futures' gains Wednesday and buying in the adjacent live cattle arena. Feeder cattle contracts were also bullishly underpriced based on CME's feeder cattle index.

Also, August and September were technically oversold given their 26% and 23% Relative Strength Index conditions. Any contract's RSI of 30% or less means it has become relatively inexpensive and subject to an upward adjustment.

Spot-May, which settled at 1 p.m. EDT, closed up 0.07 cent, or 0.07%, at 108.55 cents. Most-actively traded August, now the new lead month, ended up 0.20 cent, or 0.2%, at 108.50 cents.

Meanwhile, pit-traded CME hogs finished mixed after bearish cash hog prices clashed with bullish broader market developments.

Lean hogs also traded in choppy fashion throughout the morning as periodic profit-taking after futures' upswing Wednesday encountered buying on breaks tied to June and July bullish price discounts to CME's lean hog index.

And while talk that packers and retailers require less supplies before the holiday fed market bears, bullish players looked ahead to what they expect will be increased demand for hogs and pork to satisfy the appetite of post-holiday summer grillers.

Spreading out of spot-June into deferred contracts dropped the spot month below the 100-day moving average support level. The spread, however, kept July above its 10-day moving average support floor.

Spot-June finished down 0.47 cent a pound, or 0.6%, at 81.17 cents. Nearby-July closed up 0.10 cent, or 0.1%, at 82.70 cents.

CME July pork bellies closed down 0.55 cent, or 0.5%, at 102.05 cents after it tripped a small number of sell orders. Other belly months were unquoted.