U.S. livestock: CME live cattle sink on fund selling

Commodities funds take risk-off stance due to COVID-19

CME April 2020 live cattle with Bollinger (20,2) bands. (Barchart)

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures fell sharply in actively traded nearby contracts on Wednesday as concerns about the spread of coronavirus and its impact on demand triggered active selling by commodities funds.

Slumping cash market prices further fueled the slide, with the benchmark April contract sinking to its lowest point in 5-1/2 months.

The number of new coronavirus infections outside of China — the source of the outbreak — surpassed those in China for the first time on Wednesday, hammering global markets for a third straight day.

The spread of the virus that has infected some 80,000 people worldwide and killed more than 2,700 could dampen economic growth and slow restaurant traffic, which would hurt demand for beef more acutely than pork and chicken, analysts said.

“The funds are still long so we’re still seeing fund liquidation in the cattle,” said Don Roose, president of U.S. Commodities. “And the weak cash prices are keeping the pressure on the market.”

Feedlot cattle at southern U.S. Plains markets traded in moderate volume this week at $115/cwt, down $5 from a week ago, according to the U.S. Department of Agriculture (all figures US$).

CME April live cattle ended down 0.6 cent at 112.35 cents/lb., the contract’s lowest since Sept. 10, 2019.

Feeder cattle futures, however, bounced on Wednesday in a partial recovery after hitting a 5-1/2 month low in the prior session. April feeder cattle futures ended up 1.85 cents at 135.975 cents/lb.

Lean hog futures were also firmer, with April futures up 0.475 cent at 65.15 cents/lb. and June futures up 0.7 cent at 80.4 cents.

Hog traders are still awaiting a surge in import purchases by China, the world’s top hog and pork market, following its signing of an initial trade deal with the United States.

A massive release of frozen pork from government stocks in China on Thursday because of a severe shortage suggested the country may soon need to dramatically accelerate pork imports from the United States, where supplies are ample, traders said.

USDA is due to release its latest weekly export sales report early on Thursday, and traders will be closely monitoring any new pork sales as well as shipments of previously reported sales.

— Reporting for Reuters by Karl Plume in Chicago.

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