Grain markets end lower on Tuesday
Wire service sources cited fund buying and short covering for the morning surge posted by live cattle futures. The WASDE report had little real impact, since the USDA made only a small revision to its 2013 forecasts. The more likely reason for the strong advance stemmed from the wholesale market, where choice cutout had jumped 2.27 cents (to 196.32 cents/pound) on the USDA midday report; rumors to that effect probably played a big role in the morning price spike. Bulls may now be counting upon a cash rebound from last week’s surprising drop later this week. The combination of concurrent equity index gains and U.S. dollar losses likely provided support as well. February live cattle jumped 1.67 cents to 131.95 cents/pound, while the April contract was up 1.42 to 135.55 cents/pound.
Given the bullish leadership exhibited by the cattle market, few traders could have been terribly surprised to see hog futures advancing as well. In fact, the cattle news did seem to be pulling the swine market higher despite less than supportive short-term hog and pork fundamentals. The cattle gains seemingly supported the deferred swine contracts as well, although one might just as easily argue that today’s grain and soy weakness will translate into reduced feed costs and greater cattle and hog supplies by the middle of next year. The subdued gains posted by the nearby hog contracts probably reflect the ongoing seasonal decline in cash hog and wholesale pork values, with the midday 3.0-cent drop in ham prices very likely weighing heavily upon short-term sentiment. On the other hand, bullish traders may be looking for buying opportunities if/when the traditional December ham breakdown runs its course. February futures rose 0.22 cents higher to 84.20 cents/pound, while the June contract surged 0.65 cents to 99.10 cents/pound.
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