Cattle futures swing wildly – CME

Lean hog futures also end the day lower

Chicago Mercantile Exchange (CME) cattle futures plunged sharply on Friday, with back-month feeder cattle contracts setting new lows, as signs of a weakening US economy spurred market participants to unwind long positions and seek cover, Reuters reported, citing traders.

Lean hog futures also ended the day lower.

The volatile trading began after the US Labor Department reported the US unemployment rate had jumped to a near three-year high in July, heightening market fears that the economy was vulnerable to a recession. That in turn sent investors racing for safe havens, fuelling a sell-off in global equities, a sharp drop in the US dollar and US Treasury yields falling to multi-month lows.

The ripple effects also rolled across US agricultural markets, where livestock futures swung wildly on signs of algorithmic trading, traders said.

One example was the most-active September feeder cattle futures, which saw a contract range of 730 points from high to low, or the equivalent of a $3,650 swing per contract on the day, said independent livestock trader Dan Norcini.

Speculators have been holding net long positions in cattle on surprisingly strong demand for beef, and net short positions in hogs as demand for pork has been sluggish, traders said.

The volatility in cattle futures came as cash market prices for fed cattle are hovering near all-time record levels. A trade in the Southern Plains was reported on Thursday at $188 per hundredweight (cwt).

“With cash markets red hot, how do you get this big of a break in the cattle futures?” said Mike Zuzolo, president of Global Commodity Analytics. “I’ll tell you how: algorithmic trading.”

CME August live cattle futures ended Friday down 0.700 cents at 184.100 cents per pound, while most-active October live cattle futures settled down 1.650 cents at 182.075 cents per pound.

CME August feeders ended down 3.500 cents at 249.650 cents per pound, while most-active September feeders closed down 3.650 cents at 248.150 cents per pound.

CME August lean hog futures ended 0.950 cent lower at 92.200 cents per pound. October lean hog futures ended 0.450 cents lower at 76.575 cents per pound.