Cattle Futures Drop in “Quiet Session”

Live cattle futures edged lower as the quiet cash market provided little clue for Tuesday’s trading.

CME live cattle futures for April delivery dropped 0.2% to $1.1535 a pound, a sharp discount to the market’s current cash trade. In Kansas, cash cattle were sold for $1.21 a pound in an “extremely quiet” session, traders said.

However, the limited market moves masked the dividing views in the cattle pit. The discount reflected the expectations that a large amount of cattle would come online and be market-ready in 60 days, keeping meat packers on the sidelines and futures prices under pressure. But packers who just began to enjoy positive margins a few days ago were expected to come back to purchase cattle if beef demand continues to be strong.

“It’s an interesting dissection,” said Steve Wagner of CHS Hedging, who expected the futures market to catch up with the cash market once demand returns.

But Dennis Smith, a broker at Archer Financial Services, said he was anticipating the cash prices to fall toward the futures. “The board is sending a clear signal that at some point soon the cash market will fall apart,” possibly triggered by an increase in the number of finished cattle and a peak in wholesale demand, he added.

This week’s cattle slaughter is estimated to be 583,000, up slightly from last week and up 7.4% from last year, according to Archer Financial Services.

One telling sign will be Wednesday’s livestock auction held at the Fed Cattle Exchange, where traders will be able to see how eager packers are there to buy. Last week, cattle were sold at $1.25 per pound.

Meanwhile, CME lean hog futures for April were up 1.3% to settle at 68.050 cents a pound, as wholesale prices for pork belly recovered.

Grain and soybean futures dropped across the board Tuesday, as traders trimmed bets amid a gloomy outlook for prices.

Soybean futures were the worst performers, edging toward the lowest close since early January before regaining some strength late in the session. May soybean futures contracts, the most actively traded on the Chicago Board of Trade, closed down 1.2% at $10.25 1/4 a bushel.

Corn followed in tow with early losses that leveled off later Tuesday, closing down 0.7% at $3.76 a bushel to continue a downward drift in recent days.

Analysts said that with good weather conditions globally leading to plentiful harvests there was little to suggest a boon to prices anytime soon.

“We’ve kind of just been stuck in a range here,” said Doug Bergman, agricultural trading director at RCM Alternatives. “The growing season has been pretty favorable, and as you would expect the production numbers are strong.”

Soybeans have been hit particularly hard by a stream of private-sector forecasts that put the ongoing Brazilian harvest at record highs. That has driven speculators to pull money out of the oilseed ahead of a U.S. government report Thursday that analysts also expect to boost production estimates.

“It would appear that bulls have headed for the exit,” wrote analyst Dan Hueber in a note, saying that there was further room for losses.

Unusually dry weather in key U.S. growing regions offered some protection to wheat futures, however, which came back from a steep drop at the opening to finish down 0.4% at $4.56 1/2 a bushel. Traders are prepared to factor a risk premium into wheat prices, as warm weather in the southern plains can bring some of the crop out of dormancy early and increases its vulnerability.

Oil prices edged higher Tuesday amid hopes that growing global demand and limited output among major producers will help ease an oversupplied market.

Light, sweet crude for April delivery rose 10 cents, or 0.2% to $53.30 a barrel on the New York Mercantile Exchange, nearing a one-week high. Brent, the global benchmark, rose 4 cents, or 0.1% to $56.05 a barrel.

Gasoline futures climbed 0.6% to $1.6830 a gallon and diesel futures rose 0.8% to $1.6169 a gallon.

Natural gas prices broke a five-session winning streak Tuesday, as warmer weather forecasts and high stockpiles weighed on expectations for demand.

Natural gas for April delivery settled down 7.7 cents, or 2.7%, at $2.824 a million British thermal units on the New York Mercantile Exchange.

U.S. stocks wavered Tuesday as major indexes were stuck in a holding pattern.

The Dow Jones Industrial Average slipped 30 points, or 0.1%, to 20925. The S&P 500 edged down 0.3% to 2368, while the Nasdaq Composite fell 0.3% to 5834.

A native of the Texas Panhandle, Rhonda was born and raised on a cotton farm where she saw cotton farming evolve from ditch irrigation to center pivot irrigation and harvest trailers to modules. After graduating from Texas Tech University, she got her start in radio with KGNC News Talk 710 in Amarillo, Texas.