Cattle futures sank Tuesday as lower beef prices spurred bets that the market was unwinding from its seasonal peak.
Wholesale beef prices fell sharply Tuesday morning to $2.46 per pound from a little under $2.48 a pound on Monday. That added pressure to live cattle futures, with June contracts closing 0.7% lower at $1.23075 a pound at the Chicago Mercantile Exchange. August feeder cattle futures also fell.
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Cattle futures have flip-flopped after hitting a high in early May, while prices on the cash market have also struggled. The soaring value of wholesale beef, however, has cushioned packers to continue paying more for their inventory, preventing a sharp correction. Beef prices will likely start trending lower too, said Steve Wagner of brokerage CHS Hedging in Minnesota.
"Packers are making very good money, and I think they're going to stay in the game until that changes," Mr. Wagner said.
The HedgersEdge beefpacker margin index rose to $153.90 per head on Tuesday, despite being in the red less than two weeks ago.
A government cold storage report released after the markets closed Monday also pressured beef prices after showing a lower-than-expected drawdown in beef stocks in commercial freezers by 1% from the previous month.
While slightly negative, the report "can be a little deceiving as a lot of product in storage is staged there awaiting export," said Troy Vetterkind, of Vetterkind Cattle Brokerage in Wisconsin.
An unexpectedly large addition in frozen pork stocks, which rose 9% from March to April, had a limited impact on the futures trade. After opening lower, CME June lean hog futures proceeded to close up 1% at 80.15 cents a pound.
Part of the strength could be because of funds switching course to bet hog futures would rise while cattle fall, said Mr. Wagner, with pork prices heading toward their late spring boost.
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(END) Dow Jones Newswires
May 23, 2017 15:14 ET (19:14 GMT)