Cattle Rally Stumbles on Profit-Taking

By Benjamin Parkin Features Dow Jones Newswires

Cattle futures fell sharply on Friday as money managers booked profits on a soaring livestock rally.

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Live cattle futures have been the best-performing commodity so far in 2017, up 37% for the year. Much of the gain came during a 3-day burst that saw futures hit their upper limits multiple times this week, as the number of outstanding contracts rose to record levels.

But that rally lost momentum on Friday as speculators began to close positions and lock-in profits. Futures shot lower.

"They pumped it up too fast and too far," said Steve Wagner, an analyst at CHS Hedging in Saint Paul, Minnesota. "It's going to be a pretty wild ride for the next month in cattle."

Live cattle futures for June and August delivery hit their exchange-mandated daily trading bottom in Friday's session at the Chicago Mercantile Exchange. June contracts fell 3 cents, or 2.3%, to $1.28300 a pound.

CME feeder cattle futures through January also sunk to their lower limits, a sign that traders expect prices to trend lower for months to come. The most-actively traded August contract fell 4 1/2 cents, or 2.9%, to $1.53425 a pound.

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The reversal came despite signs of underlying cattle-and-beef demand continuing to strengthen. Wholesale beef prices rose to $2.38 a pound on Friday morning, rising 15% in less than a month. Beef exports in March also rose from the previous year, according to the U.S. Department of Agriculture.

The "explosive" figures represented the largest monthly export volume since June 2014, the Steiner Consulting Group said.

Hog futures, which have recently been carried on the back of strength in the cattle market, also struggled on Friday. CME June lean hog futures fell 0.1% to 76.400 cents a pound.

Unlike for cattle, though, traders largely see hog prices trending higher into the summer as demand enjoys a seasonal bump. The USDA also reported an increase in pork exports, and pork prices rose to 76.75 cents a pound on Friday.

Write to Benjamin Parkin at benjamin.parkin@wsj.com

(END) Dow Jones Newswires

May 05, 2017 15:05 ET (19:05 GMT)