January 29, 2009

 

Chicago Mercantile Exchange live cattle settled steady to weak Wednesday (January 28) on bear spreading, cash cattle caution and sell stops.

 

Feeder cattle closed firm, lean hogs ended higher and pork bellies finished slightly mixed.

 

Beef futures spiked at first, prodded by feelings that Tuesday's downturn was unwarranted. Also, a second straight day of US stock sector gains emboldened bullish players.

 

However, uneasiness about this week's potential cash cattle outcome, given the sloth-like pace of wholesale beef demand, spawned selling into upticks.

 

So far this week, cash-basis fed cattle moved at US$80 to US$81, with a few head in Kansas down to US$78. Feeders elsewhere resist selling at those price levels. Fed cattle last week moved at mostly US$82.

 

The US Department of Agriculture's midday Wednesday boxed beef data showed choice cuts down US$0.70 per hundredweight, and select items slipped US$0.50.

 

Periodic February and April selling at one point pressed both contracts to their lowest levels since December 5.

 

Thursday will bring participants a day closer to last trading day for the month on Friday, possible increased cash cattle transactions and Friday's USDA semiannual cattle survey.

 

Traders on Thursday will also see if financial and equities markets are able to sustain recent upward mobility.

 

And February and April remain oversold chart-wise, which might provide downside support for those contracts on Thursday.

 

Feeder cattle closed firm on spot-January jockeying before the contract expires on Thursday at 1 p.m. EST, short covering and spreading into March out of January and April.

 

February live cattle closed down 10 points at 81.17 cents a pound, and April finished up 2 points at 84.42 cents.

 

January feeder cattle ended up 10 points at 94.20 cents, and March closed up 30 points at 90.57 cents.

 

CME hogs ended higher on short covering, front-months' oversold chart situations and better-than-expected midday direct cash hog quotes.

 

Pork futures jumped initially, sparked by massive short covering as the end of the month draws nearer. Hog's plunge to new contract lows on Tuesday gave some a reason to buy futures on Wednesday.

 

Spot-February's discount to CME's hog index lured speculative longs. Also, Chicago Board of Trade corn's rebound from overnight lows inspired deferred-month hog buyers.

 

Traders bought February and May and sold April on spreads.

 

Floor traders anticipate steady cash hog prices for Thursday. Some processors may push for weekend supplies while others tinker with sagging profit margins.

 

Market volatility may become an issue Thursday as participants square positions before the last trading for the month.

 

Pork bellies ended slightly mixed, featuring Tuesday's bearish-construed CME weekly belly storage numbers, February/March bear spreading and sporadic short covering.

 

February through May earlier drifted to new seasonal lows.

 

February hogs closed 97 points higher at 56.72 cents a pound, and April closed 65 points higher at 61.35 cents.

 

February pork bellies closed 75 points lower at 78.50 cents, and fell to a 78.30-cent new contract low. March closed up 5 points at 79.52 cents, and bounced off its 78.80-cent fresh seasonal bottom.