Cattle Futures Reverse to Close Lower

By Benjamin Parkin Features Dow Jones Newswires

Cattle futures closed sharply lower on Tuesday, reversing course as a rally continued to lose momentum.

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Futures opened higher in Tuesday's session only to do a U-turn after contracts fell through technical support indicators. The combination of lighter-weight cattle and soaring beef prices helped push prices higher in the recent futures trade, but analysts questioned whether levels had now outpaced demand.

"It was the perfect storm," said Don Roose, president of brokerage U.S. Commodities Inc. "Now we have higher-priced beef at the retail level, and are we going to be able to sell it?"

Live cattle future for June delivery closed 2.8 cents, or 2.2%, lower at $1.24975 a pound at the Chicago Mercantile Exchange. CME August feeder cattle futures fell 4.5 cents, or 2.9%, to their lower daily limit of $1.5215 a pound.

Beef prices, however, continued rising. Wholesale beef rose to $2.42 per pound on Tuesday morning, gaining almost a fifth from a month earlier.

Higher prices on the cash market for cattle last week helped drive futures upward, and traders will be watching Wednesday's online Fed Cattle Exchange auction for this week's cash tone. A little under 2,000 cattle are listed for the auction, an uptick from the previous one but still far below recent levels.

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Packers have already started to lower their bids this week, said Brian Hoops of brokerage Midwest Market Solutions Inc., though feedyards haven't bit yet.

Analysts say pork could muscle aside beef as American's red meat of choice this summer. That's helped keep hog futures level despite the pressure from falling cattle contracts.

CME June lean hog futures closed unchanged at 77.375 cents a pound, approaching a year-peak. Prices are currently trading at the highest since mid-July.

Higher cash prices for hogs, which rose to 66.5 cents a pound on Monday, are supporting the futures market. But the considerable premium built into futures prices makes them vulnerable to a correction, said Mr. Roose.

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

(END) Dow Jones Newswires

May 09, 2017 15:01 ET (19:01 GMT)