U.S. livestock: Supply buildup fears undercut CME live cattle

Chicago | Reuters — Chicago Mercantile Exchange live cattle futures on Tuesday finished lower as concern about increased supplies ahead yanked the market from early-session highs, traders said.

Investors exercised caution while waiting for the bulk of slaughter-ready, or cash, cattle in the U.S. Plains to change hands this week.

April ended 0.4 cents/lb. lower at 122.825 cents, and June finished down 0.575 cent at 114.775 cents (all figures US$).

Based on recent U.S. government cattle reports, the industry will have plenty of animals to move through the pipeline, Top Third Ag Marketing broker Jeff French said.

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“Beef demand has been good, but it will have to remain robust or else we’re going to continue to backlog cattle,” he said.

On Tuesday, a few cattle in the U.S. Plains brought $126/cwt versus mostly $127 last week. Remaining sellers are holding out for at least $128.

Wednesday’s Fed Cattle Exchange auction of 474 animals could set the bar for this week’s cash prices.

Market bulls believe higher packer margins and the recent bump in wholesale beef demand bodes well for cash returns.

Bearish investors contend that packers pulling from cattle contracted against the futures market, and increased supplies in the coming weeks, will kept a lid on cash prices.

Funds in CME’s livestock markets that track the Standard + Poor’s Goldman Sachs Commodity Index sold, or “rolled,” some of their April long positions into the June contract.

The “roll” process was done in advance of similar moves that will officially begin on Wednesday and last five business days.

Flat-to-weaker cash feeder cattle prices and softer CME live cattle futures pressured the exchange’s feeder cattle contracts.

March feeders ended 0.85 cent/lb. lower at 144.3 cents.

Hog futures turn lower

Profit taking and lower wholesale pork prices weighed on CME lean hogs, said traders.

Processors competed for supplies while taking advantage of their impressive margins, but the Lenten season will make it harder for packers to move significant amounts of meat, a trader said.

Uneasiness over NAFTA negotiations after U.S. President Donald Trump signaled that he will raise tariffs on steel and aluminum imports further weighed on CME hog futures.

“If the Trump administration does anything with NAFTA, there could be repercussions on the meat side, specially the hogs,” French said.

April hogs closed down 0.6 cents/lb. lower at 68.2 cents, and May finished 1.5 cents lower at 74.25 cents.

— Reporting for Reuters by Theopolis Waters in Chicago.

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