September 23, 2010

 

CME cattle and hog futures fall on fund-selling

CME live cattle contracts tumbled Wednesday on fund-selling, alongside feeder cattle and lean hog futures finishing well below board.

 

Live cattle at the exchange pulled back from the start after cash cattle prices came in generally steady to down slightly in parts of the Plains due to listing packer profits.

 

Fed or slaughter-ready cattle this week sold mostly for US$98, with a few at US$97. Fed cattle a week earlier brought mainly US$98.

 

The margin that packers make for slaughtering cattle and producing beef was minus US$11.75 per head for Tuesday's operations, compared with minus US$12.20 Monday, according to reports.

 

Spot-October and nearby-December live cattle cascaded downward after both months fell through their respective 96.91-cents and 99.05-cents 40-day moving average support floors, which sparked selling by funds. October and December tripped preplaced orders to sell as they tumbled.

 

October touched off addition sell orders after it slipped beneath the 96.30-cent low on September 7. December selling accelerated when it drifted below its 98.65-cents low.

 

Meanwhile, traders sold December and April live cattle contracts and bought October on spreads. Spreads consist of trading two or more months simultaneously while capitalising on the price differences between them.

 

Spot October live cattle ended down 1.32 cents a pound, or 1.4%, at 96.17 cents. Nearby December finished down 1.85 cents, or 1.9%, at 98.20 cents.

 

The selloff in CME's live cattle arena seeped into the nearby feeder cattle pit. Spot-September feeder selling occurred as the contract prepares to meet its September 30 expiration date.

 

Also, September and October feeder cattle months descended to 3 1/2-month bottoms after touching off orders to sell.

 

Spot September feeder cattle ended down 1.25 cents, or 1.1%, at 109.25 cents. Most-actively traded October finished 1.62 cents lower, or 1.5%, at 109.02 cents.

 

Floor-traded hogs at the CME settled lower for the first time in three days on profit taking and fund selling. CME hogs began the session in mixed fashion. Spillover from recent hog futures advances met with negativity following Tuesday's 44-cent wholesale pork price setback and pockets of cash-hog price weakness.

 

Sellers outnumbered buyers after spot-October and nearby-December drifted below their respective 79.02-cents and 77.00-cents Tuesday lows. The selling pace quickened when October and December filled recent chart gaps where there were not enough orders to buy to cushion futures' fall.

 

October hog's chart gap was between Tuesday's 79.02-cents low and Monday's 78.60-cents high. Tuesday's 77.00-cents bottom and Monday's 76.90-cents top defined December's narrow chart gap.

 

The US government's monthly cold storage report that was released at 3 p.m. EDT Wednesday was considered neutral for CME hog contracts on Thursday, according to analysts.

 

The data showed August total pork stocks at 384.8 million pounds, down 27.4% from the previous year. Last month's ham inventory was reported at 139.6 million pounds, its highest amount for the month of August in two years.

 

Meanwhile, spot October hogs ended at 78.75 cents a pound, 0.60 cent lower or 0.6%. Nearby December finished 0.75 cent, or 0.7%, at 76.55 cents.