October 6, 2010

 

CME cattle futures up on renewed contracts

 

 

Pit-traded CME live cattle futures Tuesday (Oct 5) closed higher amid some repurchasing of contracts after Monday's (Oct 4) steep slide and on general commodities buying.

 

In the other markets, feeder cattle were lower and lean hogs were mostly higher. The demand in commodities markets was linked to a lower US dollar in currency markets, which is supposed to make US exports more attractive to buyers.

 

Analysts said several countries were doing what they could to make their currencies of lower value for this reason. Various intervention methods have been used from infusing money into the economy to keeping interest rates low to refusing to allow the currency to float.

 

The end result has been that aside from short-term fluctuations, the US dollar has maintained a somewhat stable relationship to most other currencies. The euro is a notable example of an exception, the broker said. This currency has risen in value in spite of heavy debt loads by some member countries.

 

Other traders said early commodity fund-style selling dried up in live cattle futures after the initial flurry of activity, leaving the market to trade in a narrow range throughout the session.

 

A late flurry of trading also took place, but prices changed little from midsession. The cash cattle markets were expected to decline this week.

 

Feeder cattle futures were down because of higher corn prices and feelings among some traders that prices had gotten too high in relation to deferred live cattle prices.

 

October live cattle settled 0.45 cent a pound, or 0.47%, higher at 95.55 cents. December was 0.37 cent, or 0.38%, higher at 97.67 cents. October feeder cattle were down 0.95 cent, or 0.86%, at 109.55 cents, and November was off 1.17 cents, or 1.06%, at 109.50 cents.

 

Meanwhile, pit-traded CME lean hog futures closed mostly higher, with only spot October hogs lower.

 

Seasonal weakness in cash hog prices has weighed on October in recent sessions and could limit any gains in the spot month futures contract through its expiration on October 14. Spot October hit nearly a five-week low and extended the backslide that began in late September.

 

The other months bounced back from losses that on Monday had left them at or near an over-sold status technically. Short-covering or buying back of contracts sold previously, and spillover from strength in most other commodities in association with sharply higher stock prices also aided hogs' rally.

 

Higher corn and soymeal prices would mean more costly feed for hog producers. That contributed to the strength in the deferred summer and fall 2011 contracts which were among the strongest gainers on the day in lean hogs at 0.8% to 1.2% higher.