U.S. livestock: Technical trading, holiday fears sour hog, cattle futures

Chicago | Reuters –– The Chicago Mercantile Exchange saw all of its live cattle and all but two feeder cattle futures contracts fall by the daily trading limit on Monday, pressured by technical selling and weakening wholesale beef prices, traders and industry analysts said.

Meanwhile, CME lean hog contracts continued their slump on Monday, dropping to a six-year low for a third straight trading day as plentiful seasonal supplies pulled prices lower for market-ready hogs.

December lean hogs closed down 1.275 cents at 53.525 cents/lb. on Monday, after earlier reaching a contract low of 53.1 cents (all figures US$). February lean hogs was 1.825 cents lower at 56.225 cents.

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Weak cash hog and pork prices continued to weigh on futures, said analysts, with hogs on a continuous chart trading at the lowest levels since October 2009.

But a downturn in the equities markets also weighed on the protein sector, particularly for cattle, as livestock futures can follow shifts in the stock markets on speculation that weaker returns can reduce demand for pricier goods such as steak or prime rib.

The slump in live cattle futures came after a brief respite last week, when prices were strengthened by short covering after three straight days of losses pegged to weaker cash and wholesale beef values, traders said.

On Monday, spot December live cattle closed the day at 131.925 cents/lb., three cents lower, while February was also down three cents at 134.15 cents.

CME feeder cattle also were weighed down on technical trading, holiday demand fears and lower market-ready cattle prices last week, with spot November closed at 177.125 cents/lb., down the daily limit of 4.5 cents, and January was also limit down at 167.525.

The slight drop in cash prices cast a bit of a bearish outlook over the futures market, said traders.

But both the cattle industry and livestock traders seem more focused on questions about how robust the holiday demand for pricier beef and pork cuts will be in the U.S., said Jessica Sampson, agricultural economist at the Livestock Marketing Information Center.

“The beef packers are still doing well right now, with increased kill levels in some areas and their profits in the black,” Sampson said. “But there’s a lot of talk about whether we’ll see lackluster demand over the holidays.”

Steve Wagner, an analyst with CHS Hedging, expects beef demand to pick up between mid-November and early December based on the U.S. October unemployment rate, which recently hit a 7-1/2-year low.

P.J. Huffstutter reports on agriculture and ag markets for Reuters from Chicago. Additional reporting for Reuters by Michael Hirtzer in Chicago.

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