Chicago Mercantile Exchange (CME) live cattle futures closed lower on Thursday as profit-taking took place, with the most-active contracts failing to surpass last week’s long-term highs. This decline was mirrored in grains, crude oil, and Wall Street equities, according to analysts cited by Reuters.
In specific numbers, February live cattle futures settled 1.925 cents lower at 196.600 cents per pound, while April live cattle fell 1.650 cents to end at 197.675 cents. CME March feeder cattle also ended down 2.075 cents at 267.725 cents a pound.
Speculators have been actively buying live cattle futures since September, with managed funds extending their net long position in CME live cattle futures to 144,486 contracts in the latest week. This is the largest position seen in nearly six years, as indicated by weekly commitments data from the US Commodity Futures Trading Commission.
The significant net long position leaves the market vulnerable to long liquidation on days when supportive news is lacking. Some market participants may also be opting to wait on the sidelines ahead of the incoming administration of US President-elect Donald Trump.
Doug Houghton, an analyst at Brock Associates, highlighted the current scenario, stating that “The funds are pretty heavily long and they are somewhat over-bought. How much of this is positioning before the long weekend and the presidential inauguration, the uncertainty about trade issues – it’s hard to say.”
Despite the pullback on Thursday, the supply and demand fundamentals remain supportive for cattle. Drought conditions in recent years have led to a reduction in the nation’s herd to its smallest size in decades, which has bolstered cash cattle and wholesale beef prices.
Houghton emphasized, “Until there are signs that the cash situation changes … it’s hard to see a big downside for futures.” The US Department of Agriculture’s (USDA) boxed-beef index for choice cuts eased from a 19-month high set on Wednesday, with choice cuts of beef priced at $333.41 per hundredweight on Thursday afternoon.
In the lean hog futures market, CME lean hog futures also experienced a decline on Thursday as the April contract failed to match Wednesday’s one-month high. April hogs settled down 0.475 cent at 90.550 cents per pound, while front-month February hogs ended down 0.825 cent at 82.300 cents per pound. The USDA priced pork carcasses at $90.39 per hundredweight on Thursday afternoon, down 44 cents from the previous session.
Overall, the market movements in live cattle and lean hog futures reflect a complex interplay of factors including profit-taking, speculative activity, supply and demand dynamics, and broader market trends. As investors navigate these fluctuations, staying informed about regulatory changes and global events will be crucial in making informed decisions in the livestock futures market.