Chicago Mercantile Exchange (CME) hog futures settled mostly firm on Tuesday as funds sold the spot-June contract and bought deferred months as dictated by the Goldman Sachs Commodity Index roll.
Funds that follow Standard + Poor’s Goldman Sachs Commodity Index shifted their June long positions into July and August. Tuesday was the first of five days of that roll.
CME hogs drew sporadic short-covering support following higher cash hog and wholesale pork prices, analysts and traders said.
But they said fallen margins could soon curb packer demand for supplies which limited CME hogs’ advances.
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“We could be watching the last rush by packers to top off inventories before the weekend,” a trader said. “And grocers could reduce pork purchases after filling Memorial Day meat orders.”
June hogs settled down 0.025 cent at 91.3 cents per pound (all figures US$). July closed at 91.375 cents, up 0.125 cents, and August ended at 90.3 cents, 0.25 cent higher.
U.S. pork packer margins on Tuesday were estimated at a negative $7.90 per head. It was same as on Monday and compared to a positive $4.50 a week ago, according to HedgersEdge.com.
U.S. Department of Agriculture data showed the average hog price on Tuesday in the most-watched Iowa/Minnesota market at $90.42 per hundredweight (cwt), $2.96 higher than on Monday.
USDA’s Tuesday afternoon mandatory wholesale pork price, calculated on a plant-delivered basis, was $87.92/cwt — 91 cents higher than on Monday.
Cash unease pressures cattle
CME live cattle slipped from morning highs in anticipation of a seasonal top in cash and wholesale beef prices, traders and analysts said.
Investors were expecting a steady-to-weak cash cattle trade with the return of packer margins into the red and more supplies for sale than last week.
The roll by funds that track the Goldman Sachs index weighed more on June but lessened August and October losses.
June closed at 120.825 cents, 0.475 cents/lb. lower. August ended down 0.35 cent at 121.05 cents.
Packers will resist buying cattle at $128-$130/cwt given June futures’ current price, a trader said.
Spotty cash cattle bids surfaced in Kansas at $125/cwt, said feedlot sources. There were no bids and asking prices reported elsewhere in the state and the U.S. Plains, they said.
Last week, cash cattle in Texas and Kansas sold at $128-$129/cwt. Live-basis cattle in Nebraska fetched $130-$131.
The wholesale price of choice beef, or cutout, on Tuesday gained 93 cents/cwt from Monday, to $201.19/cwt. Select cuts rose 65 cents to $190.26, according to USDA.
U.S. beef packer margins on Tuesday were estimated at a negative $15.95 per head versus a positive $3.90 on Monday and a negative $27.35 a week ago, according to HedgersEdge.com.
CME feeder cattle fell on the lower live cattle market and weaker cash feeder prices in the most-watched Oklahoma City market.
May feeder cattle closed at 136.875 cents, down 1.525 cents/lb. It sank to a new contract low of 136.55 cents in after-hours trading.
August settled 0.9 cent lower at 146.55 cents.
— Theopolis Waters reports for Reuters from Chicago.
