Crop prices started the week generally lower
Cattle futures seemingly posted a bullish breakout Wednesday, but turned sharply lower in concert with most other commodities Thursday. Bears could reasonably argue that the morning breakdown in choice beef cutout played a big role in the drop, especially since the choice-select spread has narrowed substantially this week. That suggests the supply of well-finished cattle has actually undergone a relative improvement. News that a few Southern Plains cattle had changed hands at 126 cents/pound, about one cent below the comparable week-ago figure, may also have weighed upon Chicago prices. Ultimately, we suspect the livestock markets are also suffering from a broad wave of position liquidation by futures and hedge funds. This phenomenon may prove rather common through the end of the year, thereby making life difficult for traders on both sides of the market. February live cattle futures dove 0.85 cents to 133.50 cents/pound; its April counterpart fell 0.55 cents to 137.40.
The winter storm dominating the Central Plains is probably creating problems for the hog industry at this point, as indicated by the daily slaughter total about 50,000 head of recent norms. The late-morning pork report also seemed somewhat supportive of the short term outlook. That may partially explain the fact that CME lean hog futures held up much better than many of their agricultural counterparts Thursday. And yet, today’s price action suggests the hog market could also prove vulnerable to a broad exit of the commodity sector by fund traders, particularly if short-term cash and wholesale weakness proves greater than is generally anticipated. February hogs lost 0.30 cents to 86.27 cents/pound by late morning, while its June counterpart fell 0.52 cents to 100.07.
The USDA indicated this morning that the cotton sales figure for last week, at 3,900 bales, had pushed the 2012-13 total up to 76% of its forecast for the whole crop year, thereby easily topping the five-year norm at 71%. Unfortunately for bullish interests, the concurrent breakdown in the grain and soy complex dragged the white fiber market downward as well. Furthermore, big losses in the metal and livestock complexes suggested futures funds were actively exiting positions before the holiday season, which ultimately created a general rout across the commodity markets. Given the circumstances, cotton seemed to hold up remarkably well. March cotton ended Thursday’s trading having slipped 0.20 cents to 75.63, while December dipped 0.16 to 78.07 cents/pound.