Chicago | Reuters –– Chicago Mercantile Exchange live cattle turned lower on Monday, pressured by profit-taking and futures’ modest premiums to last week’s cash prices, traders said.
June closed 0.45 cent per pound lower at 152 cents, and August was down 0.075 cent, to 151.825 cents (all figures US$).
Futures changed from being at a discount to trading at a premium to cash, which is a significant shift from a market standpoint, said U.S. Commodities analyst Don Roose.
“It tells you that the cash market eventually pulled the futures down,” Roose said.
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Packers have not bid for market-ready (cash) cattle, after feedyards in Texas and Kansas priced them at $152 to $153/cwt, feedlot sources said. A week ago, cash cattle in the U.S. Plains sold at $150.
Bullish investors expect packers to spend the same or more for supplies than last week based on their rising margins and less cattle for sale.
Beef packer margins for Monday were at a positive $75.82 per head, compared with a positive $42.10 on Friday, as calculated by HedgersEdge.com.
Market bears point to Tuesday’s mixed, rather than higher, beef cutout values and packing plant production slowdowns to limit cash spending.
Tuesday morning’s wholesale choice beef price rose 91 cents/cwt from Monday to $253.95/cwt. Select cuts slipped 28 cents to $247.78, the U.S. Department of Agriculture said.
In a trading strategy known as bear spreading, investors bought the August contract and at the same time sold June as it prepares to expire on June 30.
Strong corn prices and weak CME live cattle futures pressured the exchange’s feeder cattle contracts.
August ended down 0.425 cent/lb. lower at 225.35 cents.
Hogs mixed, off session highs
CME lean hogs closed mixed, and down from morning tops, amid conflicting fundamental signals and trepidation before Friday’s government quarterly hog report, traders said.
July closed up 0.125 cent/lb., to 74.35 cents, and August down 0.125 cent, to 72.25 cents.
Tuesday morning’s USDA data showed the average cash hog price in the western Midwest at $75.75/cwt, up 40 cents from Monday.
Separate government data quoted Tuesday morning’s wholesale pork price at $83.57/cwt, $1.13 lower than on Monday.
Futures’ discount to CME’s hog index for June 19 at 79.43 cents stirred buying, but “the moment of truth will be USDA’s hog report coming up on Friday,” said Roose.
— Theopolis Waters reports on livestock futures markets for Reuters from Chicago.
