U.S. hog futures turned lower Monday on profit taking and sentiment cash prices are about to top out, wiping out an early-session spike to a six-month high, said traders and analysts.
Chicago Mercantile Exchange (CME) hogs also rose to a relative strength index (RSI) reading of 76.67 -- its highest since 77.07 on June 14. A RSI of 70 is viewed as technically overbought and poised for a downward correction.
Investors also cited spot December hogs' premium to CME's lean hog index of 80.31 cents. The spot month is set to expire on Dec. 14.
Spot December hogs settled at 83.925 cents per pound, down 0.15 cent, or 0.18 per cent, after peaking at its highest level in nine months. Most-actively traded February closed 1.25 cents lower, or 1.44 per cent, at 85.675 cents.
"Cash has been on a tear lately while wholesale pork demand was so-so, which wore down packer margins. They (packers) are not going after hogs knowing pork demand may fade after ham business is done for the year-end holidays," a trader said.
Still, others believe some processors may need supplies to accommodate this week's slaughter schedule and because of declining year-over-year hog weights that suggest tightening supplies.
The average hog price Monday morning in the most-watched Iowa/Minnesota hog market was $85.46 per hundredweight (cwt), $2.15 higher than on Friday, according to the U.S. Department of Agriculture.
HedgersEdge.com put pork packer margins for Monday at negative 60 cents/cwt, compared with positive $2.25 on Friday and positive $8.75 for Nov. 26.
Cattle firm with beef prices
Live cattle futures captured some of the ground it lost last Friday, aided by the snap back in wholesale beef prices that triggered short-covering, analysts and traders said.
USDA's wholesale price data showed choice beef Monday morning at $195.25/cwt, up 22 cents from Friday, with select cuts 65 cents higher at $174.85.
CME February live cattle led advances, fueled by spread trading as the December contract heads to expiry on Dec. 31. Those spreads also lifted February beyond the 100-day moving average of 130.72 cents, which sparked light fund buying.
Live cattle at the CME clawed back from losses suffered early Monday and Friday after cash cattle prices late last week came in lower-than-expected -- with a possible repeat performance this week.
Packers last week paid $125-$126/cwt for cattle, $2-$3 lower than the week before, while grappling with unprofitable margins and inconsistent wholesale beef demand.
"There's not much changed fundamentally this week from last week, so I don't see reason for packers to buy cattle any higher," a trader said.
HedgersEdge.com put the average beef packer margin for Monday at negative $82.95 per head, compared with negative $78.95 on Friday and negative $58.20 on Nov. 26.
Spot December live cattle closed up 0.275 cent/lb., or 0.22 per cent, to 127 cents. Most-active February ended 0.375 cent higher, or 0.29 per cent, at 130.775 cents.
CME feeder cattle slipped on technical selling and sell stops.
January closed off 0.025 cent per lb, or 0.02 per cent, at 145.6 cents. March finished at 148.225 cents, down 0.2 cent or 0.13 per cent.
-- Theopolis Waters writes for Reuters from Chicago.