DJ CME Livestock Review:Cash,Goldman 'Roll' Drop Cattle;Hogs Mixed

The "Goldman roll" consists of funds shuffling some of their spot December long positions into nearby February. Wednesday was the fourth of five days for the current roll period that is done in conjunction with the S&P's GSCI.

Feeder cattle also finished well below board. Lean hogs closed narrowly mixed. And February pork bellies, the only contract that traded, ended higher.

Spillover from Tuesday's live cattle futures' weakness and anxiety about this week's cash cattle outcome undermined beef contracts from the start.

Cash-basis cattle in Nebraska sold for $83 per hundredweight, which was down $3 compared with prices in the area last week. No trading was reported elsewhere. The bulk of last week's cattle in the Plains brought $87.50.

Unprofitable beef packer margins and reduced boxed-beef prices contributed to futures' bearish tone from the outset.

The U.S. government's midday Wednesday boxed-beef data showed choice cuts down $0.19 per hundredweight, and select items shed $0.65.

The latest operating margin index for beef packers was minus $20.15 per head, compared with minus $17.10 the previous day, as calculated by HedgersEdge.com.

Some distant cattle traders sold April and bought February as the U.S. dollar firmed, Chicago Board of Trade corn struggled to find equilibrium and U.S. stocks rose only slightly.

Market participants on Thursday will eagerly await the trade of unsold fed cattle heading into the weekend.

Futures' fall in response to Wednesday's cash sales, negative beef processor margins and sluggish wholesale meat demand might work against feeders on Thursday, a usually upbeat CME cattle trader said.

Although Thursday will be the final official day for the current "Goldman roll" period, the process will likely linger into the middle of next week because of December's huge open interest.

December live cattle closed 95 points lower at 83.65 cents a pound, and February finished down 35 points at 85.92 cents.

Feeder cattle also closed lower on more selling following futures' retreat Tuesday, live cattle's stumble and feeder contracts' premiums to CME's feeder cattle index.

November and January feeders also tripped sell stops. And, traders sold January and bought November on spreads.

November feeder cattle ended 55 points lower at 93.32 cents, and January closed 125 points lower at 93.47 cents.

Pork Complex

CME hogs finished narrowly mixed on the tug-of-war between "Goldman roll" practitioners and December/February forward spreaders.

Contrary to mainly weak pre-market calls, partly because of late Tuesday's pork cutout price setback, lean hogs spiked after the opening bell. The unexpected turn up was driven by short covering in extremely low volume and buy stops.

"I'm just as surprised as you because I was thinking at least a 50-point lower open," an admitted CME hog bear said. "The fundamental news doesn't look good and you've got Thanksgiving right around the corner and a lot of that meat business is done."

The trader believes a small order may have been the catalyst for futures' initial climb amid the volume-challenged open. He also speculated that word of North Carolina hog producer Coharie Farms' recent Chapter 11 bankruptcy filing may have "excited" market bulls.

If Coharie liquidates its sow herd, which has been estimated at around 30,000 head, some may see that as bearish for December futures and positive for other months because it implies fewer pigs down the road, the trader said. Yet, December futures were higher, he said.

However, initial buying stalled when December encountered 10-day moving average resistance. February futures, which bobbed above the 10-day moving average surface, later became a target of those who took aim at the contract's bearish premium to CME's hog index.

Meanwhile, would-be back-month hog bulls remained on the sidelines because of the U.S. dollar's uptick, stocks' slight advances and generally steady CBOT corn.

Steady-to-weak cash hog prices are expected for Thursday. Producers who were closed Wednesday for Veterans Day will sort through hogs that were bought earlier this week to carry over into Thursday.

Other packers are expected to nurse tight but profitable margins by purchasing only the hogs they need heading into the Thanksgiving Day holiday.

And, longs may roll out of December into February in earnest on Thursday, the last official day of the current "Goldman roll" phase.

December hogs ended down 2 points at 55.60 cents a pound, and February finished up 5 points 63.17 cents.

February pork bellies ended 112 points higher at 85.50 cents on short covering and Tuesday's bullish CME weekly belly storage report. February triggered buy stops after it rolled through 20-day moving average resistance.

Other belly months are unquoted.

-By Theopolis Waters, Dow Jones Newswires; 312-559-4965; theopolis.waters@dowjones.com

(END) Dow Jones Newswires

11-11-09 1613ET

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