U.S. livestock: CME live cattle snap back on short-covering

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures on Friday shrugged off Thursday’s losses, with October up the three-cents/lb. daily price limit on short-covering and technical buying, traders said.

October live cattle ended limit up at 104.4 cents/lb. after breaking through the 10-day moving average of 103.89 cents (all figures US$). December closed 2.8 cents higher at 105.4 cents.

Live cattle’s trading limit will be expanded to 4.5 cents on Monday.

October futures’ discount to this week’s cash prices periodically generated a trading strategy known as bull spreading. It consisted of traders who bought the October contract and simultaneously sold December.

At the same time, Friday was the second of five days for some funds trading in CME’s livestock markets to shift or “roll” October positions mainly into December. The process is tied to the Standard + Poor’s Goldman Sachs Commodity Index (S+PGSCI).

Some investors were skeptical that Friday’s market rally would carry over into Monday following this week’s lower cash prices and lacklustre wholesale beef demand.

This week, packers paid mostly $105/cwt for market-ready, or cash, cattle that a week ago fetched $110-$111, said feedlot sources.

Friday morning’s choice beef price dropped $1.20/cwt from Thursday, to $187.94. Select cuts were up 37 cents, to $183, according to the U.S. Department of Agriculture.

“There may be some hope that feedlots are having a fire sale and that supplies might tighten up a little and beef demand might perk up a bit,” said Brock Associates Inc. analyst Doug Houghton.

Analysts and traders said cash prices and beef demand usually improve around early September as some end-users consider purchasing product for year-end holidays.

Live cattle futures’ turnaround pulled up CME feeder cattle contracts. September ended 2.625 cents/lb. higher at 134.225 cents.

Hog market slides

CME lean hogs retreated on fund rolling and profit-taking after recent market advances, said traders.

They said some investors that earlier this week bought lean hog futures and at the same time sold live cattle contracts reversed those positions on Friday.

October closed 1.775 cents/lb. lower at 59.225 cents, and December ended down 1.55 cents to 53.925 cents.

Some market participants exercised caution while awaiting clear fundamental market direction.

Friday morning’s Midwest cash hog prices were steady, said regional hog dealers.

USDA data showed the afternoon wholesale pork price declined 59 cents/cwt from Thursday to $81.08.

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

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