Chicago | Reuters — U.S. live cattle futures closed lower on Monday as investors booked profits after contract highs hit on Friday, traders said.
Managed funds hold a large net long position in Chicago Mercantile Exchange live cattle futures, leaving the market vulnerable to bouts of long liquidation.
The funds expanded their net long in the week to Feb. 19 to more than 115,000 contracts, the largest since December 2017, weekly commitments data from the U.S. Commodity Futures Trading Commission showed after Friday’s close.
“Funds have built a very long position in the fat cattle… it could have been profit-taking on the first Monday of March,” said Jeff French, analyst at Top Third Ag Marketing in Chicago.
However, he noted, the market drew underlying support from wintry weather in the U.S. Plains and Midwest that has reduced cattle weights.
Traders adjusted positions ahead of the U.S. Department of Agriculture’s monthly cattle-on-feed report for January, scheduled for release on Friday.
“The market knows we are going to be dealing with more cattle on feed compared to last year, right into the June to July period. But with lower weights, it doesn’t make that much more product,” French said.
Most-active CME April live cattle settled down 1.2 cent at 128.35 cents/lb. (all figures US$). June live cattle ended down 0.625 cent at 119.8 cents/lb.
CME March feeder cattle futures lost 0.025 cent to settle at 141.2 cents/lb. April feeder cattle futures slid 0.025 cent to 145.025 cents/lb.
In the lean hog market, the benchmark April contract closed higher for a third straight session, continuing to rebound from a contract low set Feb. 20.
CME April lean hogs rose 0.925 cent to settle Monday at 57.325 cents/lb.
However, concerns about large hog herds and low pork prices hung over the market.
French said traders have been disappointed by the lack of pork demand from China in light of the African swine fever epidemic that has swept through the Asian country’s hog herd.
The incurable pig disease has been confirmed in 28 Chinese provinces and regions.
“The African swine fever has been an over-hyped, under-delivered topic,” French said.
Meanwhile, U.S. Secretary of State Mike Pompeo said he thought the United States and China were “on the cusp” of a deal to end their trade war, adding to positive signs about negotiations from both sides of the Pacific.
— Julie Ingwersen is a Reuters commodities correspondent in Chicago.