Chicago Mercantile Exchange Live and Feeder Cattle Futures Mostly Steady

Strategic Insights -

Despite beef packers regaining control of their cutout values and cattle slaughter increasing Tuesday, opening calls for Chicago Mercantile Exchange live and feeder cattle futures were mostly steady. The main buyers during the recent futures rallies have been funds and fund-like accounts, which rolled Aug longs and purchased additional Oct and Dec contracts. Cash-connected traders said large hedgers would emerge to take on the fund buying by establishing short hedges, but futures rallied through those sales to new highs.

Key Takeaways:

  • Live cattle open interest increased 2,281 contracts Tuesday, despite position declines in Aug.
  • Funds rolled Aug longs and purchased additional Oct and Dec contracts, driving new highs in most months.
  • Cash live cattle pricing will be closely watched this week, as traders wait to see if large hedgers will emerge to counter fund buying.
  • The CME feeder index was $0.92 higher at $116.31, driven by new highs and increasing open interest.
  • Lean hog futures responded to pork cutout strength Tuesday, pushing winter months to new highs and Oct to its daily 200-point limit-up price level.
  • The choice/select spread for Tuesday was $3.12, and boxed-beef prices were up $2.46 at $141.80 per light choice.
  • The operating margin index for cattle packers Tuesday was plus $18.25 per head, indicating a general health in the industry.

Statistics:

  • Live cattle open interest increased 2,281 contracts Tuesday.
  • Funds rolled Aug longs and purchased additional Oct and Dec contracts, driving new highs in most months.
  • The CME feeder index was $0.92 higher at $116.31.
  • Lean hog futures pushed winter months to new highs and Oct to its daily 200-point limit-up price level.
  • The choice/select spread for Tuesday was $3.12.
  • Boxed-beef prices were up $2.46 at $141.80 per light choice.
  • The operating margin index for cattle packers Tuesday was plus $18.25 per head.

Sources:

  • COMTEX via ODJ, Chicago, IL, July 28, 2004
  • Dow Jones, Chicago, IL, July 28, 2004
  • USDA, Washington, D.C., July 28, 2004
  • HedgersEdge.com, Chicago, IL, July 28, 2004
  • By Jim Cote, Dow Jones Newswires, 312-715-6284, jcote@osterdowjones.com
  • COMTEX News (http://www.comtexnews.com)