U.S. livestock: CME feeder cattle plunge limit-down

Chicago | Reuters — Most Chicago Mercantile Exchange feeder cattle contracts closed down the maximum three-cents-per-pound daily price limit as live cattle contracts slid and corn prices climbed, traders said.

Expensive feed could increase input costs for feedlot operators.

“Today you’ve got the combination of lower cattle and higher corn in a thinly traded feeder cattle market,” said EBOTTrading senior analyst John Kleist.

October closed 2.575 cents per pound lower at 238.725 cents (all figures US$). November and January ended at 237.15 and 231.125 cents, down three cents.

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Live cattle slump

CME live cattle closed down sharply on profit-taking that some viewed as a correction to recent spikes to new highs, traders said.

October closed 2.15 cents/lb. lower at 164.35 cents, and December down 2.775 cents to 163.925 cents.

Markets periodically make new highs and have a correction, and the live cattle market became overextended, said Kleist.

Futures’ losses mounted after the December and February contracts drifted below the 10-day moving average of 166.23 cents and 165.94 cents, which triggered fund liquidation.

Tuesday’s CME live cattle retreat softened initial optimism for fully steady cash prices that were backed by upward-trending beef cutout values and fewer animals available for sale this week.

Last week, market-ready or cash cattle moved at $162 to $165 per hundredweight (cwt), according to feedlot sources.

Tuesday morning’s choice wholesale beef price rose 95 cents/cwt from Monday to $249.26. Select was up 30 cents to $236.71, the U.S. Department of Agriculture said.

Packers reduced slaughters and hiked wholesale beef values to recover lost margins and counter last week’s higher cattle prices.

Hogs end firm

CME lean hogs closed higher on short-covering and futures’ discounts to the exchange’s hog index for Oct. 10 at 109.92 cents, traders said.

October hogs, which expired at noon CT, settled up 0.175 cent/lb. at 109.525 cents.

December, the new lead month, closed 0.3 cent higher at 94.925 cents, and February at 92.2 cents, up 0.1 cent.

Investors are unsure about the December contract’s near-term direction.

Seasonally expanding supplies could consistently pressure cash prices in the weeks ahead, a trader said. But, packers may not significantly lower cash bids given their impressive margins, he said.

USDA’s Tuesday morning direct cash hog prices were unavailable. Hogs in the Midwest traded steady with Monday’s sales, according to regional hog dealers.

Pork packer margins for Tuesday were a negative $26.50 per head, compared with a negative $27.60 on Monday and a negative $29.85 a week earlier, according to Colorado-based analytics firm HedgersEdge.com.

— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.

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