Chicago Mercantile Exchange live cattle futures dipped on Tuesday on profit-taking as wholesale beef prices slipped and beef packer margins remained negative, traders said.
Beef packer margins improved slightly on Tuesday, but were still in the red as lower wholesale prices squeezed profits.
Choice wholesale beef values early on Tuesday were down 22 cents from Monday to $202.57 and $2.88 lower than a week ago, according to U.S. Department of Agriculture data (all figures US$).
Despite negative margins, packers still need supplies, which could keep cash cattle prices at least steady this week, traders said.
Last week, packers paid $1 less per hundredweight (cwt) for cattle than the week before at mostly $131, with a few sales of $132/cwt, feedlot sources said.
Traders noted more cattle for sale in the U.S. Plains this week. But, the longer term trend is for tighter supplies given the herd at a 61-year low.
December finished 0.075 cent per pound lower at 132.675 cents, and February closed at 134.275 cents, down 0.1 cent.
Front-month CME feeder cattle ended higher as corn prices at the Chicago Board of Trade eased. The weak CME live cattle market pressured back-month feeder cattle contracts.
November closed up 0.45 cent/lb. at 164.65 cents, and January ended at 164.2 cents, up 0.025 cent. March ended 0.125 cent lower at 164.2 cents.
Hogs pressured by lower cash prices
Lower cash hog prices pressured CME hog futures, traders said.
Tuesday morning, USDA pegged hog prices in closely watched Iowa/Minnesota down $3.16/cwt from Monday at $79.20/cwt in light trade. Prices in the eastern hog markets fell by $1.06 to $79.98.
Cash hog prices have been pressured by ample supplies at higher weights, according to traders and hog brokers.
Falling cash prices and slowly rising hog numbers undercut initial market support tied to worries about the spread of the porcine epidemic diarrhea virus (PEDv) on U.S. hog farms, independent livestock futures trader Dan Norcini said.
Speculators recently bought deferred-month CME hogs with the view that resurgence of PEDv, which is fatal to baby pigs, can reduce hog production through the middle of 2014.
December hogs ended down 0.85 cent at 87.2 cents, while February closed 0.875 cent lower at 91.35 cents.
— Meredith Davis reports on U.S. ag commodities for Reuters from Chicago. Additional reporting for Reuters by Theopolis Waters in Chicago.