CME Livestock Review: Fund Sales, 'Roll' Drive Cattle Lower
11/06/2009 02:48PM
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CHICAGO (Dow Jones)--Chicago Mercantile Exchange live cattle settled lower Friday on fund selling, sell stops and "Goldman roll" transactions.
The "Goldman roll" consists of fund longs moving some of their spot-December positions into nearby-February. Friday was the first of five days for the official start of the current roll period that is tied to the S&P's GSCI.
Feeder cattle also finished in bearish territory. Live hogs closed mostly lower. February pork bellies, the only contract that traded, ended higher.
Live cattle headed down immediately after the opening bell due to fed cattle quotes that softened as the week wore on. Wholesale beef demand's recent slowed pace suggest to some that retailers may be leaning more toward hams and poultry as the Thanksgiving Day holiday approaches.
December and February fell through 20- and 40-day-moving-average support levels, tripped sell stops and set selling by institutional traders into motion. Also, there was concern that the country's 10.2% unemployed workers might jeopardize beef sales.
Meanwhile, Chicago Board of Trade corn's subsequent drop discouraged far-cattle-month speculative bulls.
Cash cattle this week for the most part changed hands at $87.50 per hundredweight, versus primarily $87 last week. But, there is chatter that Friday's lower futures may be pricing in possibly diminished fed-cattle returns next week.
Beef could play second fiddle to poultry and hams over the Thanksgiving Day holiday, which could further weigh on beef-cutout values. Also, processors might attempt to recoup lost margins by backing down cash bids next week.
The U.S. Department of Agriculture's Friday afternoon boxed-beef data showed choice cuts down $0.46 per hundredweight and select items off $0.21.
The latest operating margin index for beef packers was minus $22.10 per head, compared with minus $20.20 the previous day, as calculated by HedgersEdge.com.
Monday will be day 2 for the current "Goldman roll" session.
December live cattle closed 135 points lower 85.00 cents a pound, and February finished 95 points lower at 86.27 cents.
Feeder cattle closed lower on profit-taking, sell stops and fund selling after November and January slipped beneath key technical-support areas.
Futures were at bearish premiums to CME's feeder cattle index. Live cattle pressure spilled over into the feeder cattle pit. Spreaders sold January and bought November and March.
November feeder cattle ended 95 points lower at 94.65 cents, and January closed 110 points lower at 96.07 cents.
Pork Complex
CME hogs settled mostly lower on weakened midday direct cash hog prices, the migration of funds out of December into February and sell stops.
Hog futures found it difficult to muster momentum while saddled with December and February premiums to CME's hog index and both months' technically overbought nature.
Also, pork-cutout prices face an uphill climb over the next few weeks if retailers purchase less product as they top off meat cases in preparation for the Thanksgiving Day holiday.
December gave up 10-day-moving-average support and filled the Oct. 29 chart gap. February dropped though its 10-day-moving-average-support floor but stopped short of plugging the Oct. 29 chart gap.
Some deferred-hog contracts landed on positive turf after the U.S. stock market recovered from early session lows. Other back-month hogs, however, loitered in bearish territory because of low-priced corn.
Spreading was common throughout the morning including February/April bear positioning.
Cash hog prices are seen steady to weak Monday. Some packers are expected to sort through supplies carried over from Friday. Three plants are scheduled to be idle Wednesday because of the Veterans Day holiday.
Also, another day of "Goldman roll" business is on tap for Monday.
December hogs ended 90 points lower at 55.70 cents a pound, and February finished 62 points lower at 62.85 cents.
February pork bellies closed 130 points higher at 86.10 cents a pound on short-covering, buy stops and chart-related purchasing after the contract broke through 20-day-moving-average resistance.
Other belly months were unquoted.
-By Theopolis Waters, Dow Jones Newswires; 312-559-4965; theopolis.waters@dowjones.com