October 21, 2010
CME cattle and hogs futures up on fund buying
CME cattle futures and lean hogs settled higher Wednesday, pushed by increased buying interest from commodity fund-style firms.
Fund buying interest was linked to a reversal in the US dollar downward after sharp gains Tuesday. Fund-related activity was virtually the opposite of Tuesday's moves.
Traders said the fund action was not related to anything in the cash markets or the chart patterns of the various commodities targeted by the computer-generated buying. It was based strictly on proprietary formulas, and the buying was generated by computers.
However, live cattle received a fair bit of its own buying interest when cash prices shot higher in the Plains as packers competed for available supplies. Hedge lifting after the cash sales was said to be a part of the buying interest in the nearby October contract.
Beef markets also continue to move higher this week, adding to the speculative buying interest in live cattle, traders said.
Feeder cattle were mixed for most of the session, but finally gave in to pressure from higher corn prices in spite of some fund-related buying interest.
October live cattle settled 1.60 cents a pound, or 1.61%, higher at 101.27 cents. December was 0.67 cent, or 0.66%, higher at 101.62 cents. October feeder cattle were down 0.22 cent, or 0.20%, at 109.40 cents, and November was off 0.50 cent, or 0.45%, at 110.30 cents.
CME lean hog futures settled higher Wednesday, pushed upward by strong buying interest from the commodity fund-style firms who were buying a wide variety of commodities.
Many investors were kept at bay by the fund-style buying, a floor trader said. Investors don't want to go against the fund buying when they start buying everything in sight, knowing that eventually, the market will have to reconcile itself, and they figure they can profit later.
A very weak cash market asserted pressure on the market at midsession, but traders said another round of buying by the funds took prices higher into the close.
Hog futures also got help from some investors who repurchased previously sold positions in December, a broker said. Many of these were preventing further losses on their positions and moving to the sidelines to await further developments.
Higher corn prices reminded some fundamental traders that production will be kept in check over the course of the year because feed costs are going to be higher.
December lean hog futures settled up 52 cents a pound, or 0.76%, at 68.72 cents. February was up 50 cents, or 0.68%, at 73.50 cents.