Chicago | Reuters — Chicago Mercantile Exchange live cattle futures were pressured on Wednesday by profit-taking, partly in response to sharply lower wholesale beef values, said traders.
February live cattle closed 0.4 cent/lb. lower at 119.125 cents (all figures US$).
CME live cattle will return to its normal three-cent trading limit on Thursday after failing to settle at the expanded 4.5-cent limit on Wednesday.
Wednesday morning’s choice wholesale beef price, or cutout, tumbled $2.96/cwt from Tuesday to $190.42. Select cuts fell $2.06 to $187.91, the U.S. Department of Agriculture said.
“We’ve got a collapse going on in wholesale beef,” said Allendale Inc. chief strategist Rich Nelson. He and others anticipated a seasonal decline in the beef cutout price, but not to the extent seen recently.
Typically this time of year, demand for high-end beef cuts tend to suffer as consumers concentrate on paying off year-end holiday debt, said traders and analysts.
Market investors await prices for unsold cash cattle later this week given slumping beef demand, slim packer margins and better-than-expected early-week cash returns.
On Wednesday, animals at the Fed Cattle Exchange on average brought $119.16/cwt, up from last week’s $116.77 average.
There were no packer bids or offers from sellers for remaining slaughter-ready, or cash, cattle in the U.S. Plains that a week ago brought mostly $118/cwt.
Wednesday was the third of five days in which funds that track the Standard + Poor’s Goldman Sachs Commodity Index sold, or “rolled,” their February long positions into back months.
At the same time, the annual rebalancing by funds continued, which resulted in increased long positions in live cattle and lean hog futures.
Live cattle futures selling and weaker cash feeder cattle prices pulled the exchange’s feeder cattle contracts from a four-month high.
January feeders closed 0.65 cent/lb. lower, at 132.05 cents.
Firmer hog futures
Rising cash hog prices and Wednesday’s wholesale pork price turnaround, boosted CME lean hogs, said traders.
February hogs ended up 0.55 cent/lb. higher at 65.6 cents.
“Tight supplies and surprisingly resilient product sales were incentives for packers to keep hogs flowing,” a Midwest hog merchant said.
Wednesday morning’s cash hog price in Iowa/Minnesota averaged $58.11/cwt, $1.71 higher than on Tuesday, USDA said.
Separate U.S. government data on Wednesday morning showed the average wholesale pork price surged $3.27, to $81.49, from Tuesday, mainly driven by more than $10 higher hams.
— Theopolis Waters reports on livestock markets for Reuters from Chicago.