Funds Sour on American Meat
March 20 2018 - 3:28PM
Dow Jones News
By Benjamin Parkin
Cattle and hog futures probed new multimonth lows on
Tuesday.
Both markets have tumbled in recent sessions on everything from
domestic oversupply of livestock to concerns that trade tensions
will disrupt global demand for U.S. meat.
Those headwinds prompted hedge funds and other large speculative
traders to unwind their bets that prices for cattle and hogs would
rise, analysts said. The Commodity Futures Trading Commission
reported last week that money managers had cut their net long
positions in futures and options for both markets, a trend that
observers say has continued into this week.
"The futures market continues to break down as managed money
funds exit long positions," Troy Vetterkind, of Vetterkind Cattle
Brokerage, said of the cattle market Tuesday morning.
"It would still appear as any near-term rallies are going to be
met with heavy selling in anticipation of larger fed cattle
supplies in the coming weeks."
The prospect of a looming boost in available slaughter-ready
supplies has weighed down the cattle market, pushing prices to a
two-month low.
April-dated live cattle contracts fell 0.5% to $1.19575 a pound
at the Chicago Mercantile Exchange. Cattle traders also reacted to
expectations that cash prices for physical cattle would fall this
week.
Market observers said that meatpackers were bidding $125 and
$126 per 100 pounds for slaughter-ready cattle in important
producing states like Texas and Kansas, with some early sales
booked around at those prices. That would be below last week's
national average of $128 and regional average of $127. Hog futures
were mostly lower.
The front-month lean-hog contract for April rose 0.2% to 63.25
cents a pound, inching off nearly a four-month low, while futures
for later months fell. The cash market for hogs has slid for eight
consecutive sessions, to a low of $56.41 per 100 pounds on Monday,
and was expected to fall further on Tuesday.
Futures traders were betting that prospects for a near-term
bounce were limited. Trade tensions, meanwhile, loomed over both
cattle and hog markets. Market participants were betting that the
much-touted prospect of a trade war with China and others could
hurt meat exporters who need to increase their share of the global
market in order to offset growing domestic supplies.
Write to Benjamin Parkin at benjamin.parkin@wsj.com
(END) Dow Jones Newswires
March 20, 2018 15:13 ET (19:13 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.