July 13, 2010

 

CME hog futures fall on weaker cash price expectations

 

 

Pit-traded CME lean hogs fell in most months, pressured by flat to weaker near-term cash price expectations, failed chart support levels in the 2010 contracts and rolling.

 

In the other markets, pork bellies were lower, and the cattle complex closed weaker.

 

Brokers and analysts said there are enough hogs readily available to the processing plants this week that packers may be able to put pressure on cash prices throughout the week. The most-active August contract's premium to the latest CME two-day cash index contributed to the pressure in that month.

 

Rolling of positions out of July and August into October and some to December continued from last week ahead of July's expiration coming up this week.

 

July gapped lower on the open then slid further later to hit a one-month low in the closing minutes when support at the July 2 low of 78.15 cents a pound was broken. July closed down 0.50 cent at 78.12 cents, its lowest since June 10.

 

August posted a nearly five-week low and filled a chart gap that had been opened on June 9. The most-active contract closed down 0.57 cent at 79.45. The 2011 lean hog contracts closed mixed in light volume trading.

 

Pork belly futures closed lower on spillover pressure from losses in the front hog contracts. July fell 0.50 cent to 101.70, while August was off 0.55 cent at 96.50.

 

Meanwhile, pit-traded CME live cattle futures settled steady to mostly lower as new buying interest failed to show up and USDA estimates of beef and meat production rose.

 

The market was rangebound throughout most of Monday's session, unable to get the nearby August contract above 91.00 cents a pound and to sustain a drop below 90.00 cents, brokers said. A close on either side of this range could have been seen as indicative of things to come for the week.

 

Some market analysts, however, are calling for a slightly lower cash market for the week, saying that unexpected holiday beef demand created a higher cash cattle market for a week. They point to seasonal tendencies for lower prices through the middle of summer as the basis for their predictions.

 

Beef markets seem softer coming out of last week and into this week, one market analyst said. The best demand time of the year is past, and a slow period is starting.

 

The USDA has predicted that 2010 beef production will be up 160 million pounds and total meat production could be up 281 million pounds compared with the department's estimates a month ago.

 

Besides, the Commodity Futures Trading Commission's weekly commitments of traders report says commodity funds are net long, which holds the threat that these traders could begin to sell out, the broker said. This selling could undermine any price strength the market might have.

 

Buyers on the day appeared to be traders covering previously sold positions and not new investors who were willing to buy as an investment.

 

Feeder cattle were lower as deferred live cattle sank, an analyst said.

 

August live cattle settled 0.12 cent, or 0.14%, lower at 90.07 cents a pound while October ended unchanged at 91.40 cents. August feeder cattle settled down 0.52 cent, or 0.47%, at 112.67 cents, while September closed down 0.82 cent, or 0.72%, at 112.85 cents a pound.