July 9, 2010
CME cash cattle prices extends live cattle gains
Stronger-than-expected cash cattle returns this week extended CME live cattle gains into a third straight day Thursday (July 8).
Stock market advances over the past few days was another bright spot for CME live cattle participants, especially given early Thursday's (July 8) encouraging US weekly jobless-claims news.
Signs that the nation's economy is mending could enhance consumer demand for various expensive household goods such as high-end meat cuts.
"Cash cattle prices that generally ran US$91 over the past three weeks were definitely supportive to the market," said Rich Nelson, analyst with Allendale Inc. "Gains on the stock market side was a plus as well."
Cash cattle this week for the most part sold for US$91 to US$93 per hundredweight, compared with the bulk of animals that brought US$91 last week.
Some processors had supplies well in hand prior to curtailing operations in preparation for the long Fourth of July holiday weekend. Others, however, were caught short of cattle after the holiday and scrambled to fulfil their needs.
Spot August and nearby October initially climbed to seven week tops, especially after August cleared its 100-day moving average resistance impediment.
August received added backing from spreading into the contract out of October. Spreads consist of trading two or more months simultaneously while taking advantage of the price differences between them
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Spot August live cattle closed up 0.40 cent a pound, or 0.4%, at 90.90 cents. Nearby October finished up 0.25 cent, or 0.3%, at 92.12 cents.
CME feeder cattle settled in positive territory for a fourth straight day on buying in the adjacent live-cattle pit and spreading into September out of August.
August eked out a 1-½ week high, and September moved to its highest level in eight weeks, after both months ignited buy orders that hovered over the market.
Spot August feeders closed up 0.05 cent, or 0.04%, at 113.60 cents. Nearby September closed up 0.30 cent, or 0.3%, at 114.12 cents.
Floor traded CME lean hogs finished flat to firm due to "roll" transactions. Spreaders also bought December and sold October and February.
The "roll" refers to funds shuffling some of their August long positions into October and December. The process, which officially began Thursday (July 8) and will conclude on Wednesday (July 14), is tied to commodity indexes such as the S&P's GSCI.
Lean hogs chopped around throughout the morning, stirred by residual futures buying that encountered sporadic profit taking. Fundamentally, wholesale pork prices slumped Wednesday (July 7) while a few packers in parts of the country Thursday (July 8) elevated cash hog values.
And while equities' bullish reaction to weekly jobless figures, which bodes well for sales of pricier pork items, generated hog futures buying on breaks, front months turned back after they challenged Wednesday's (July 7) highs.
Spot July travelled within a narrow trading space as it prepared to meet its Thursday (July 15) expiration date.
Spot July finished unchanged at 78.87 cents. Most actively traded August closed up 0.07 cent, or 0.1%, at 80.90 cents. October ended 0.32 cent higher, or 0.4%, at 75.30 cents.
Volume strapped August CME pork bellies finished up 0.80 cent, or 0.8%, at 95.50 cents on short covering. Other belly months were unquoted.
