CHICAGO (Dow Jones)–Chicago Mercantile Exchange hogs ended lower Monday on cash hog price losses, sell stops and spreading out of December and February into October.
Pork bellies finished sharply lower, with February limit down. Live and feeder cattle also ended below board.
Follow-through from futures’ letdown on Friday, and that evening’s slight pork cutout price dip, scuttled lean hogs from the start. Sentiments that cutout values and cash hog prices would take it on the chin this week at the hands of abundant live supplies handcuffed would-be bulls.
Spot-October selling picked up after the contract earlier slipped beneath 20-day moving average support. Nearby-December purging accelerated when the month option surrendered 10-day moving average support immediately after the open.
However, speculative October and December buying on breaks developed fueled by both contracts’ bullish discounts to CME’s hog index.
Steady-to-weak cash hog bids are seen for Tuesday due to hefty live supplies.
Pork complex participants have USDA’s monthly cold storage report on tap for Tuesday at 3 p.m. EDT.
Analysts’ average projection for U.S. belly stocks for August is 46.4 million pounds based a narrow 44.0 million to 48.834 million pound range. Ham inventory last month was estimated at 146.9 million pounds. And total amount of pork in the nation’s warehouses for August was projected at around 536.6 million pounds.
And, floor traders were already buzzing about this Friday’s U.S. Department of Agriculture quarterly hog and pig report that some believe may not show as much hog population downsizing as expected.
October hogs ended 65 points lower at 50.15 cents a pound, and December closed 92 points lower at 49.37 cents.
Pork bellies finished sharply lower, with February limit down for a second day in a row, on futures’ spillover from February’s limit-down settlement last Friday.
Sell stops, lean hogs’ drop and nervousness about plentiful live supplies exerted added belly futures pressure.
And, prospective buyers kept their distance due to uncertainty heading into two belly storage-related reports on Tuesday.
February pork bellies ended 200 points lower at 82.60 cents, and March ended 180 points lower at 81.52 cents.
Cattle Complex
CME live cattle closed moderately lower on sell stops, bear spreads and the U.S. dollar’s upswing.
Live cattle at first traded on both sides of the board as traders factored in last week’s cash cattle returns while others digested Friday’s USDA cattle-on-feed report outcome.
“Cattle-on-feed was a report for everybody,” a brokerage firm’s cattle trader said.
Those who where short the market saw the August 102.0% placement figure as bearish because it was above the average trade estimates, the trader said. However, market bulls contend that the placement outcome was expected based of predictions that up to 112.0%.
Nonetheless, market participants soon afterwards turned their attention to October that gently floated to a seven-month bottom after it tripped sell stops.
At one point, traders sold December and bought October which caused December to drift to a 9 1/2-month low after it too triggered sell stops. December at one point came within an eyelash of its 83.85-cents last seasonal low on Dec. 5.
February and June earlier fell to new contract lows.
By the same token, front cattle months’ oversold technical indicators generated buying on breaks. And talk that cash prices may find a friend in smaller number of cash cattle for sale this week freed October and December from session bottoms.
With Friday’s cattle report now history, another day of waiting for cash cattle bids and asking prices is in store for market participants on Tuesday.
While packers try to get a grip on slipping profit margins, some in the pit are encouraged by Monday afternoon’s modest boxed beef price rebound.
The USDA’s midday Monday boxed beef item showed choice items up $0.36 per hundredweight, and select cuts gained $0.34.
The latest operating margin index for beef packers was plus $11.00 per head, compared with plus $16.30 the previous day, as calculated by HedgersEdge.com.
October live cattle closed down 57 points at 84.97 cents a pound, and December finished down 37 points at 84.52 cents.
Feeder cattle ended lower on profit taking, sell stops and spot-September selling before it expires on Sept. 24. Live cattle’s retreat reflected negatively on feeder cattle.
Spreaders sold November and bought October. And, back-month feeder cattle were at bearish premiums to CME’s feeder cattle index.
September feeder cattle settled down 10 points at 97.15 cents, and October ended down 30 points at 96.72 cents.
Source: www.cattlenetwork.com