U.S. livestock: Weak cash sentiment undermines CME hog futures

Chicago Mercantile Exchange hog futures on Tuesday fell in anticipation of lower cash prices soon, traders and analysts said.

The arctic blast that snarled transportation of livestock to market is expected to subside by midweek, freeing up more hogs that could pressure cash values, they said.

The federal government estimated that packers on Tuesday processed 390,000 hogs, up 4,000 from a week ago but down 37,000 from a year earlier.

“We’ve got a pullback in the market as the weather is going to break starting tomorrow,” said Dennis Smith, an analyst with Archer Financial Services.

The U.S. Department of Agriculture’s morning direct hog market prices were unavailable. Hog values in the Midwest Tuesday morning held steady amid tight supplies, according to hog dealers.

Funds sold, or rolled, February hog and cattle futures and bought months further out before a similar process, known as the “roll”, by followers of the Goldman Sachs Commodity Index (S+PGSCI).

Funds that follow the S+PGSCI will shift, or roll, their February long positions mainly into the April contract. That shift will be for five days starting Jan. 8.

Funds also sold after February and April hog futures slipped beneath their respective 10-day moving averages of 85.915 cents and 91.02 cents (all figures US$).

February hogs closed 1.1 cents/lb. lower at 85.525 cents, and April ended at 90.725 cents, 0.7 cent lower.

Profit-taking drops cattle

CME live cattle futures sagged on profit taking following their record-setting pace, fueled by recent record-high cash prices and solid wholesale beef values, traders and analysts said.

“When you put $7 on the cash market over the past two weeks you begin to wonder what kind of news can we have that is more bullish than we’ve already seen,” said CattleHedging.com analyst Elaine Johnson.

The Tuesday morning wholesale price for choice beef rose $1.07/cwt from Monday to $206.61, and select jumped $1.65 to $203.03, based on USDA data.

Packers hiked wholesale beef costs to offset higher cattle prices, a trader said.

Last Friday, most cash cattle in the U.S. Plains fetched $137 per hundredweight (cwt), surpassing the previous week’s $133 to $136 record, feedlot sources said.

Packers may balk at spending more for cattle this week based on their improved but still poor margins. And more cattle are available for sale than a week ago.

Beef packer margins for Tuesday were estimated at a negative $76.45 per head, compared with a negative $100.05 per head on Monday and negative $84.30 a week ago, as calculated by
HedgersEdge.com.

February live cattle ended down 0.300 cent per lb at 136.525 cents, and April finished at 136.35 cents, 0.575 cent lower.

January CME feeder cattle drew support from its discount to the exchange’s feeder cattle index of 170.87 cents.

January closed at 168.050 cents/lb., up 0.025 cent.

Profit taking and live cattle market losses dragged down remaining CME feeder cattle contracts.

March finished at 167.825 cents/lb., down 0.275 cent, and April closed 0.5 cent/lb. lower at 168.4 cents.

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

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