Chicago | Reuters — Chicago Mercantile Exchange live cattle futures settled in negative territory on Friday for the first time in five days, led by sell stops and profit-taking, said traders.
They said fund buying and futures’ discounts to this week’s cash prices later lifted contracts from session lows.
February live cattle closed 0.775 cent/lb. lower at 120.25 cents, and April closed 0.9 cent lower at 118.975 cents (all figures US$).
“The futures market was due for a corrective break (decline),” said Oak Investment Group president Joe Ocrant, referring to the four-day market rally led by better-than-expected cash prices.
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This week packers paid mostly $121-$123/cwt for slaughter-ready, or cash, cattle that mainly brought $120 a week earlier, said feedlot sources.
Cash prices benefited from fewer animals for sale than last week and scant packer inventories, said traders and analysts. Next week packers may cut production to recover lost margins and drive up beef cutout values, they added.
Friday morning’s choice wholesale beef price, or cutout, fell $1.36/cwt from Thursday to $190.24. Select cuts were up 49 cents to $187.98, the U.S. Department of Agriculture said.
Average beef packer margins for Friday were a negative $40.20 per head, down from negative $25.75 on Thursday and negative $26.76 a week ago, as calculated by HedgersEdge.com.
Short-covering and CME’s feeder cattle index rise for Jan. 19 to 133.28 cents from 132.25 cents for Jan. 18 rallied the exchange’s feeder cattle contracts.
January feeders, which will expire on Jan. 26, ended up 1.15 cents/lb. to 133.1 cents. Most actively traded March closed 1.125 cents higher at 131.275 cents.
Weaker hog futures
Profit-taking and CME live cattle market selling pressured the exchange’s lean hog contracts, traders said.
They said back-month futures’ premiums to the exchange’s hog index for Jan. 18 at 66.69 cents deterred some would-be buyers.
February hogs ended down 0.125 cent/lb., to 65.3 cents, and April closed 0.5 cent lower at 68.475 cents.
Market participants will monitor cash prices amid sentiment that some processors have enough inventory for early next week, while others might raise cash bids due to tight supplies.
“I can see cash prices starting to flatten out a bit, but not go drastically lower. Packers have good margins and want to keep pigs coming,” an Ohio hog merchant said.
— Theopolis Waters reports on livestock markets for Reuters from Chicago.
