Chicago | Reuters — Chicago Mercantile Exchange live cattle contracts closed mixed on Tuesday, with nearby futures helped by their discounts to recent cash prices, while back months bowed in part to outside market pressure.
April closed 0.75 cent/lb. higher at 154.75 cents, and June up 0.1 cent at 146.25 cents (all figures US$). August finished 0.5 cent lower at 144.075 cents, and October down 0.775 cent to 146.75 cents.
The surging dollar and slumping stock market, which could hurt U.S. economic growth, discouraged some investors from buying distant trading months, traders and analysts said.
In a trading strategy known as bull or forward spreading, investors bought April and June and simultaneously sold back months in anticipation of steady or better cash prices amid tight supplies. The spread offset periodic rolling by funds.
Funds involved in CME’s livestock markets that follow the Standard + Poor’s Goldman Sachs Commodity Index (S+P GSCI) at times sold, or rolled, their April long positions into back months.
Tuesday was the third of five days for the S+P GSCI roll procedure.
“Despite the Goldman roll, I think the safest bet for people that want to be friendly (bullish) now is to be forward spread,” said Cassandra Fish, author of the Beef blog.
Processors have not responded to U.S. Plains feedlots that priced cattle at $163 to $164 per hundredweight (cwt). Last week, cash cattle generally moved at $161-$162.
Short-covering, and the exchange’s feeder cattle index bump to 212 cents for March 9 from 210.25 cents for March 6, boosted CME feeder cattle futures.
March closed 2.525 cents/lb. higher, at 212.225 cents.
Hog futures drop
CME lean hogs sagged after packers cut cash bids to grow their margins, traders said.
April closed down 0.1 cent/lb. to 65.975 cents, and May 0.775 cent lower at 75.8 cents.
U.S. Agriculture Department data showed the average cash hog price in the western Midwest on Tuesday morning fell $1.22/cwt from Monday in light volume to $62.01.
Pork packer margins were at a positive $5.35 per head, compared with a positive $3.60 on Monday, as calculated by HedgersEdge.com.
Packers are also unwilling to spend more for hogs until the pork cutout shows a steady uptrend, traders said.
The morning’s wholesale pork price was up 33 cents/cwt to $69.03 from Monday, USDA said.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.