U.S. livestock: CME hogs slump amid fund roll, NAFTA worries

(Gloria Solano-Aguilar photo courtesy ARS/USDA)

Chicago | Reuters — Chicago Mercantile Exchange lean hog futures finished lower on Friday, hit by the “roll” by funds into deferred months and uneasiness over North American Free Trade Agreement (NAFTA) talks, said traders.

“NAFTA fears, Goldman roll and premiums to the cash prices. Everyone who bought futures this week decided to dump them all in one day,” said independent livestock futures trader Dan Norcini.

Friday was the last official day that CME livestock market funds that track the Standard + Poor’s Goldman Sachs Commodity Index sold, or “rolled,” June futures mainly into August.

On Friday, Mexico’s economy minister said his country would not be rushed into revamping NAFTA to get a deal, a day after U.S. House of Representatives Speaker Paul Ryan set a May 17 deadline for the end of negotiations.

From January through March of 2018, Mexico was the top destination for U.S. pork at 203,656 tonnes valued at $371.3 million, according to the U.S. Meat Export Federation (all figures US$).

CME hog futures were overvalued, or premium, to the exchange’s hog index for May 9 at 63.73 cents. The index is a barometer of slaughter-ready, or, cash hog prices.

May hogs, which will expire at noon CT on Monday, closed down 0.175 cent/lb. at 65.3 cents. Most actively traded June ended 2.225 cents lower at 75.1 cents.

Cattle pare early losses

The exchange’s live cattle contracts ended firmer after short-covering and future’s discount to this week’s cash prices lifted the market from morning lows, said traders.

June live cattle closed up 0.1 cent/lb. at 107.625 cents. August settled up 0.125 cent at 104.425 cents.

Packers and feedlots in the U.S. Plains haggled over prices for the bulk of unsold cash cattle after a few head on Thursday fetched $120-$122/cwt. Last week’s overall cash trade was $118-$128.

Even if remaining cash prices are lower, there may not be much of a futures response because of their steep discount to cash, said CattleHedging.com president Larry Hicks.

Market bulls expect prices for unsold cattle in line with last week’s trade given strong packer profits and seasonal increase in beef demand.

Contrarians said cash prices have topped out seasonally in the face of increased supplies ahead.

Profit-taking and initial technical selling pressured CME feeder cattle contracts. May closed down 0.175 cent/lb. at 138.425 cents.

— Reporting for Reuters by Theopolis Waters in Chicago.

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