U.S. livestock: CME live cattle futures down on long liquidation

Chicago | Reuters — U.S. live cattle futures fell to a six-week low on Wednesday as lower cash beef prices and bearish technical signals prompted a round of long liquidation, traders said.

Chicago Mercantile Exchange lean hog futures closed mixed, with nearby contracts turning higher and gaining against back months.

Commodity funds hold net long positions in CME live cattle, feeder cattle and lean hog futures, leaving all three markets vulnerable to bouts of long liquidation.

As of April 16, managed funds held a net long in live cattle futures of more than 152,000 contracts, the biggest for that market in U.S. Commodity Futures Trading Commision records dating to 2006.

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“You get some people who are nervous about that fund net long position, and you are getting some selling. And once it takes out some technical levels on the charts, the computers kick in,” said independent livestock futures trader Dan Norcini.

CME June live cattle futures settled down 2.775 cents, or about 2.2 per cent, at 118.35 cents/lb. after the contract dropped below support at its 20- and 50-day moving averages (all figures US$). August live cattle futures closed down 2.375 cents at 115.825 cents/lb.

August feeder cattle tumbled 2.975 cents, to end at 156.725 cents.

Wholesale beef prices fell on Wednesday, with choice boxed beef quoted at $232.96/cwt, down $1.15, and select cuts down 98 cents at $220.28, according to USDA.

And cash cattle traded lightly at $126-$128/cwt, traders said, down roughly $2 from last week.

“A lot of us thought the feedlots would be in the driver’s seat, but they’re not. And the beef prices are not moving higher. There is no strong reason to buy, with funds already over-loaded on the long side, and beef not moving up like we thought,” Norcini said.

Nearby hog futures firmed, with the benchmark June lean hogs contract settling up 0.4 cent at 92.775 cents/lb. after dipping to a three-week low at 91.55 cents.

But October hogs drifted lower for a fourth straight session, ending down 0.1 cent at 92.6 cents/lb.

Traders awaited the U.S. Department of Agriculture’s weekly pork export sales figure on Thursday to see whether China has continued buying.

Brokers still project that China, home to the world’s largest hog herd, will need to import more pork from the U.S. and other suppliers because of an outbreak of African swine fever, a fatal hog disease.

Last week, USDA reported China bought 23,473 tonnes of U.S. pork in the week ended April 11. That was China’s third biggest purchase since the USDA began tracking sales in 2013.

— Reporting for Reuters by Julie Ingwersen in Chicago.

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