CME Livestock Review: Two-Sided Hogs; Profiteers Pare Cattle
11/03/2009 02:58PM
Bookmark
Subscribe
CHICAGO (Dow Jones)--Chicago Mercantile Exchange December and February hogs Tuesday settled weak on bear spreading associated with pre-"Goldman roll" activity.
The "Goldman roll" consists of funds shuffling some of their spot-December long positions into nearby-February. The first of five days for the approaching roll phase will officially begin on Friday and is tied to the S&P's GSCI.
Meanwhile, other hog contracts landed on positive turf due to spreading into those months out of front positions. Plus, back-month hog bulls were taken by Chicago Board of Trade corn's rebound from overnight and morning lows.
Pork bellies, live cattle and feeder cattle settled lower.
Lean hogs began the session on a sour note after those who were recently long the market pocketed profits following futures' advances Monday. Spot-December and nearby-February overbought chart conditions and their premiums to CME's hog index deterred would-be bulls.
The U.S. dollar's spike, CBOT corn's overnight retreat and U.S. equities' drop earlier were enough to discourage distant hog month buyers.
Prospective bullish hog traders at first clung to the sidelines while they gauged market reaction to Monday's news that pigs on an Indiana farm tested positive for H1N1 influenza, also referred to as swine flu.
However, longs slowly gravitated toward the market when futures responded more to other negative market forces than Monday's H1N1 developments. Bullish traders were encouraged by late-Monday's pork cutout price hike and Tuesday's higher terminal hog market cash hog quotes.
Subsequent upward lean hog momentum at one point carried December to a 3 1/2-month high and gently floated February to its highest level in 4 1/2 months.
Nonetheless, willing sellers waited above the market as December and February again ventured into overbought chart territory. Both months also widened their bearish premiums to the exchange's hog index.
Furthermore, midday direct cash hog prices came in lower than expected, although cash hog bids for Wednesday are seen steady to better.
More pre-"Goldman roll" transactions are expected on Wednesday.
The U.S. Department of Agriculture's Iowa/Southern Minnesota weekly average hog weight data will be released early Wednesday morning.
December hogs ended down 17 points at 57.55 cents a pound, and February finished down 7 points at 64.52 cents. April hogs closed up 22 points at 67.85 cents, and June finished up 30 points at 75.65 cents.
February pork bellies closed down 15 points at 89.15 cents on sell stops and the contract's overbought chart signal. A few traders also tweaked positions before CME's weekly belly storage report on Tuesday after 5 p.m. EST.
Cattle Complex
Live cattle closed lower on profit-taking, sell stops and spreaders who sold February and bought December and April.
Cattle contracts surrendered from the beginning to longs who claimed profits and February's overbought technical indicator. February gave up 40-day moving average support.
There were sentiments that cash cattle may be close to topping out near term because of unprofitable packer margins. Poultry and ham could steal beef's thunder heading into the Thanksgiving Day holiday period.
But it was the outside markets that most cited as reasons for cattle's general malaise.
The U.S. dollar gained ground on several of its overseas counterparts. The Dow Jones Industrial Average was unable to buck its downtrend. CBOT corn didn't breakout of its funk until late in the session.
Floor traders anxiously await the sale of remaining cattle on Wednesday after about 5,000 cash-basis cattle so far this week moved in the southern Plains at $88 per hundredweight.
Cattle feeders elsewhere are still asking $89 to $90 for supplies with no response from other packers. Fed cattle last week brought mostly $87.
The migration by longs out of December into February is expected Wednesday in preparation for Friday's "Goldman roll."
December live cattle settled 52 points lower at 85.70 cents a pound, and February ended 57 points lower at 87.02 cents.
Feeder cattle ended weak on profit-taking, sell stops and live cattle's pullback. November and January lost 20-day moving average support.
Futures were at bearish premiums to CME's feeder cattle index. CBOT corn's comeback curbed feeder cattle buying enthusiasm.
November feeder cattle settled down 45 points at 94.67 cents, and January closed down 30 points at 95.27 cents.
-By Theopolis Waters, Dow Jones Newswires; 312-559-4965; theopolis.waters@dowjones.com