US feeder cattle ease on overbought signals
CHICAGO -- Chicago Mercantile Exchange (CME) feeder cattle futures eased from a one-year high on Wednesday on overbought signals and despite another slide in corn prices that had been encouraging demand for young cattle, traders said.
Feeder cattle had soared to the highest price for a spot contract (158.400 cents per lb) since June 15 last summer and underwent a downward correction on Wednesday.
"Feeders just don't work at these levels. I know corn prices and feed costs are lower but cattle feeders are losing
money paying this price for feeders," said Jim Clarkson, an analyst for A&A Trading Inc.
Chicago Board of Trade (CBOT) corn futures eased 4 cents per bushel at $4.94 by the close of trading on Wednesday, helping to limit the declines in feeder cattle futures.
Corn is the root foundation for U.S. feeding of cattle, hogs and poultry and the sliding corn price has helped buoy demand for young livestock and poultry to place on feed.
CME September feeder cattle futures closed down 0.150 cent per lb at 157.025 cents per lb and October feeders
ended up 0.150 at 159.250.
Cattle futures closed lower as the cash markets in the U.S. High Plains remained at a discount to the futures price.
"Cattle are technically weak and cash cattle are steady at best," Clarkson said. "Also, futures are carrying a premium to cash.
Cattle slipped despite a firmer tone in the beef market. The U.S. Department of Agriculture's (USDA) wholesale beef market report on Wednesday showed choice beef carcasses up 38 cents per hundred pounds at $196.48 per hundred pounds.
Estimated margins for U.S. beef packing companies on Wednesday were a positive $17.00 per head, up from $9.50 on Tuesday but down from $20.20 a week ago, according to Denver-based livestock marketing advisory service HedgersEdge.com LLC.
CME October live cattle futures closed down 0.200 cent per lb at 126.000 cents per lb and December fell 0.200 to 129.900. Lean hog futures closed higher on technical signals and despite generally weaker cash hog markets.
"The spread is narrowing between the index and cash and I think some people got too short and have had to cover. That and hogs are now technically strong," Clarkson said.
The CME lean hog index price for the 2 days ending on Aug. 30 was at 92.40 cents per lb and for the 2 days ending Aug. 29 was at 93.25.
Iowa and southern Minnesota cash hog markets were steady on Wednesday and dealers said there was an adequate supply to meet the current demand. Other cash hog buying stations also reported a steady market with the exception of a $1.00 lower per hundred pound trend in Peoria.
USDA's wholesale pork market report on Wednesday showed pork carcasses up $1.01 per hundred pounds at $97.85 per hundred pounds.
Estimated margins for U.S. pork packing companies were a positive $8.15 per head on Wednesday, down from $9.10 on Tuesday and below the positive $12.35 a week ago.
CME October lean hogs were up 1.125 cents per lb at 89.125 cents per lb and December closed up 0.875 at 85.850.