October 15, 2010

 

US hog futures tumble, further declines in cash markets

 

 

CME lean hog futures Thursday (Oct 14) fell sharply with most of the contracts having triple-digit losses on active fund selling, tripped stops and further declines in the cash markets.

 

Hog futures tumbled from the outset, tracking with and then extending the steep losses that occurred in the overnight electronic trading. Brokers said funds were heavy sellers in the electronic trading, and the selling spilled over into the pit as well.

 

Sliding cash hog prices and a steep decline in wholesale pork prices Wednesday with a weaker outlook again on the mid-day Thursday pork market report kept buyers at bay.

 

There was no good news to give buyers a reason to step into the market, a broker said. Even higher corn prices could not pull up the deferred hog contracts although they did not see as severe declines as did December and February.

 

A broker said sell stops were triggered in December on the opening bell when prices slid below the previous four-month low hit last week at 70.55 cents. Many of those stops were positioned at 70.50 cents.

 

October expired at closed down 0.40 cent at 73.00 cents, while December finished down 2.85 cents, or almost 4%, at 68.85 cents. The 2011 contracts fell 0.85% to 3.1%.

 

A retreating corn market Thursday took CME live cattle futures lower but lent support to the feeder cattle market by the end of the floor session.

 

A broker said the latest rally in grains seemed to be mature so it pulled back after achieving its latest highs Wednesday. As it pulled back, other markets like live cattle and feeder cattle were affected.

 

In live cattle, the lower corn values eased the spectre of high grain costs on deferred contracts in the live cattle market. For feeders, the sagging corn prices meant the feedlots could pay more for feeder cattle in the cash market, so prices tended to rise.

 

Traders also sold live cattle to take profits on long positions, a broker said. Those holding long positions profit when prices move higher as they did early this week.

 

Supporting the cattle futures and preventing further declines were thoughts that wholesale beef markets were bottoming seasonally. Traders said this support from product markets could mean packers will be willing to pay more for fed cattle this week.

 

One long-term floor trader said the gain in Globex futures prices after the close of pit trading signalled that trading action may be taking place in the cash market Thursday afternoon. This was not confirmed immediately, however.

 

October live cattle settled 0.27 cents a pound, or 0.29%, lower at 96.07 cents. December was 0.20 cents, or 0.20%, lower at 98.27 cents. October feeder cattle were 0.02 cents a pound, or 0.03%, higher at 108.10 cents, and November was unchanged at 108.12 cents.