Feeder Cattle Futures Fall to Lower Limit, Reversing Course

Cattle futures fell Tuesday, doing a U-turn after testing seasonal highs at the opening.

Feeder cattle futures touched a fresh year high and live cattle futures climbed just short of their early May peak, but the contracts went south late in Tuesday's session. Analysts said that they were overbought after a recent rally sparked by high beef prices, lower cattle weights and wide meat-packer margins.

The last-minute reversal was the latest in a volatile month for the cattle trade, in which futures have swung across daily trading ranges and cash prices have defied seasonal trends.

Feeder cattle futures for August delivery fell 4 1/2 cents, or 2.8%, at $1.55375 a pound at the Chicago Mercantile Exchange, closing at the bottom end of their daily trading band. CME June live cattle futures closed 1.9 cents, or 1.4%, lower at $1.302 a pound.

The turnaround came despite rising wholesale beef prices, which gained 2.22 cents to $2.5057 cents a pound on Tuesday morning. Futures traders will be looking to Wednesday's cash trade for cattle, which typically starts with the weekly online Fed Cattle Exchange auction, for price direction. Cash prices recently have been at a premium to futures, despite a tendency to fall at this time of year.

Lean hog futures, however, settled higher despite also sliding later in the session. Hog contracts have recently fallen into a narrow range, though analysts say they could be pushed lower as traders book profits on the expiring front-month June contract. Hog futures are currently at a premium to cash prices.

But some analysts say pork demand continues to support optimistic bets in the futures market. Wholesale pork prices have trended higher for six weeks, while U.S. Department of Agriculture data released last week showed American pork exports rising from the previous year.

"When compared to competing proteins, this market is very competitively priced. There's still a lot of value in pork," said Craig VanDyke, an analyst with Top Third Ag Marketing, an agricultural advisory firm in Chicago.

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

(END) Dow Jones Newswires

June 06, 2017 15:36 ET (19:36 GMT)