CME Livestock Review: Pork Complex Lower; Most Cattle Up

KANSAS CITY (Dow Jones)--Chicago Mercantile Exchange lean hog futures Wednesday closed mostly lower but losses were trimmed by a moderate rally during the second half of the session.

In other markets, February and March pork bellies closed limit down, live cattle were mostly higher and feeder cattle were up.

Lean hogs began the day under stiff pressure from a sharp drop in wholesale pork prices Tuesday. Concerns among some traders that hog supplies could remain heavy and possibly increase further in the coming weeks added to the selling. Sell stops, or previously placed sell orders, were tripped when prices fell through key chart support lines. Spread trading, buying October and selling December also contributed to the latter hitting a one-week low.

Analysts and brokers said that after the steep slide that occurred early in the session was finally halted, some traders turned buyers, which resulted in a rally later that pulled prices up off their lows.

"The downside move was overdone, so the market bounced back some," a broker said. The board couldn't make it all the way back up to even, though, because of concerns among several traders about pork prices and big hog supplies, he said.

A broker/analyst said Globex spread trading was active as well. The October/December spread occurred 1,467 times in Globex, and the December/February spread was done 1,044 times, according to the CME.

Month- and quarter-ending account squaring also occurred.

October hogs closed 20 points lower, at 50.07 cents. December was 57 lower, at 49.60.

Pork bellies fell sharply, and February slid the expanded limit of 300 points to close at 81.70 cents. That followed back-to-back limit gains Monday and Tuesday. The standard daily limit will revert to 300 points for the fourth quarter since February closed above the trigger level of 60 cents.

March bellies also closed 300 lower, at 80.40 cents.

 
   Cattle Complex 
 

The pit-traded cattle complex Wednesday took part in a general commodity market reversal and ended mostly higher.

Market analysts and brokers said early weakness in the pits found technical support in the October and December contracts, even as commodity fund-style trading firms squared their books by rolling positions out of nearby contracts and into more deferred positions, the analysts said.

The reversal in commodity markets came after the Standard & Poor's 500 Index and the U.S. dollar weakened, a broker said.

An index fund was seen buying live cattle futures, and some traders thought more of the funds were buying back previously sold positions as well.

Cash markets remained quiet as cattle sellers rejected early packer bids. At the same time, some of the buying in deferred cattle futures was linked to traders who are able to use the cattle if they were delivered. There were thoughts these traders were hedging future inventory needs.

Beef markets remained a concern to many cattle futures traders who saw prices continuing to drop and heard reports of lackluster buying interest. Other traders, however, saw beef prices getting to levels that should be attractive to retail and foodservice buyers and were more willing to take a bullish outlook to investing in cattle and feeder cattle futures.

Feeder cattle were down for most of the pit session Wednesday, amid seasonal pressure on cash markets and not-so-rosy forecasts for the live cattle market based on estimates of heavy September placements into the feedlots. Late fund and investor rebuying, however, lifted feeders along with the live cattle.

The October live cattle contract settled 5 basis points lower, at 85.60 cents a pound, but December was 52 points higher, at 86.12 cents. October feeder cattle ended up 70 points, at 96.50 cents, and November was up 85, at 96.62.

-By Curt Thacker and Lester Aldrich; Dow Jones Newswires; 913-322-5178; curt.thacker@dowjones.com

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(END) Dow Jones Newswires

September 30, 2009 15:08 ET (19:08 GMT)


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