Chicago / Reuters – Most Chicago Mercantile Exchange live cattle contracts ended weak on Monday after investors sold deferred months and bought August because of its discount to last week’s cash prices, traders said.
August closed up 0.100 cent per lb at 146.750 cents, October 0.100 cent lower at 149.025 cents and December down 0.075 cent at 151.150 cents.
Justin Lewis, a broker with KIS Futures Inc, attributed some of the live cattle market’s initial buying, which later faded, to strong feeder cattle futures and last week’s cash prices at $148 per cwt rather than $146 as some had expected.
Processors this week continue to grapple with poor margins and seasonally slow beef demand, which are bearish cash price influences.
But, a few processors might need supplies as extreme heat in parts of the Plains slow down cattle weight gains and limit their movement from feedyards to packing plants.
Some traders were encouraged by the uptick in wholesale beef prices, but others preferred to wait for a trend to develop.
Monday morning’s wholesale choice beef price, or cutout, was at $234.12 per cwt, 82 cents higher than on Friday. Select cuts were up 59 cents at $229.98, the U.S. Department of Agriculture said.
“The cutout got a bit of a bounce, but it has to gain at least three days for me to call it a turnaround,” a trader said.
Wholesale beef costs may have come down enough to attract retail buyers, or packers raised prices to realign their margins, he said.
Slumping corn prices boosted CME feeder cattle future. August closed 1.125 cents per lb higher at 216.325 cents.
Cash prices weaken hogs
CME lean hogs were pressured by ample supplies that weighed on cash prices, traders said.
August ended 0.775 cent per lb lower at 74.900 cents, and October settled down 0.500 cent at 62.950 cents.
Cash hogs in the Midwest on Monday morning sold $1 per cwt lower than on Friday, according to regional hog dealers.
“Some people still want to be friendly the market due to futures’ discount to the index, but there are still a lot of hogs coming,” a trader said.
CME’s hog index for July 16 was 80.21 cents.
Investors also sold August through December hog contracts, and simultaneously bought deep-deferred months, with the view that sharply lower corn prices might encourage farmers to feed more hogs and lead to heavier weights.
— Theopolis Waters reports on livestock markets for Reuters from Chicago.