Stock reversal rallies CME cattle and hog futures

 

 

The stock market's turnaround from overnight lows landed CME live cattle and most lean hog contracts in positive territory Tuesday (June 1).

 

CME live cattle began the morning on solid footing after the financial sector shrugged off heaviness brought on by signs of a manufacturing slowdown in China, petroleum stocks' tumble and ongoing euro-zone debt uneasiness.

 

Consumer perceptions of a healing economy could encourage grocery shoppers to consider purchasing high-end beef and pork items.

 

Cattle futures gained further traction after those who bet on market losses Friday claimed profits. Also, speculative bullish traders targeted June and August price discounts compared with last week's US$93 to US$94-per-hundredweight cash trade. Fed cattle the week before moved at US$96 to US$98.

 

Additionally, later upward market momentum touched of pre-placed orders to buy. And, traders bought August and sold June on spreads as they waited for this week's cash-cattle bids and asking prices to surface.

 

Spreads involve buying two or more contracts at the same time while taking advantage of the price differences between them.

 

Spot-June live cattle closed up 0.27 cent a pound, or 0.3%, at 90.80 cents. Most-actively traded August finished up 0.37 cent, or 0.4%, at 89.62 cents.

 

CME feeder cattle ended firm on short-covering and live cattle buying. August and September were also undervalued based on their 27% and 26% Relative Strength Index readings. A contract's RSI of 30% or less implies it is oversold and subject to an upward adjustment.

 

Spot-August closed 1.05 cents higher, or 1.0%, at 109.47 cents. Nearby-September ended up 0.40 cent, or 0.4%, at 108.90 cents.

 

Meanwhile, short-covering, spreading and subsequent advances were behind Tuesday's mostly higher CME hogs' settlement, according to analysts.

 

Lean hogs began the morning in bearish territory following Friday's sizable wholesale pork price drop. Also, cash hog prices Tuesday came in down almost US$3 per hundredweight because of ample supplies after Monday's holiday.

 

Nonetheless, the prospect that retail grocery buyers would purchase more pork soon to restock meat cases after the long Memorial Day holiday weekend motivated speculative market bulls.

 

Although some packers have on-hand supplies taken care of heading into Saturday's kill, others will need hogs to accommodate next week's first full post-holiday slaughter week.

 

Spot-June finished down 0.45 cent a pound, or 0.5%, at 81.40 cents. Nearby-July closed up 0.15 cent, or 0.2%, at 82.75 cents; while July pork bellies closed 0.85 cent lower, or 0.8%, at 102.05 cents due to the lack of buyers. Other belly months were unquoted.

 

CME's weekly belly storage report, which is usually published Tuesday after 5 p.m. EDT, will be delayed until the same time on Wednesday.