Chicago Mercantile Exchange lean hog futures finished sharply higher on Monday, fueled by bargain buying in the technically oversold market, said traders.
They said funds helped accelerate market advances after contracts punched through technical resistance levels.
October hogs, which will expire on Oct. 13, ended 1.850 cents per pound higher at 57.250 cents, and above the 10-day moving average at 56.698 cents. Most actively traded December finished 2.025 cents higher at 61.975 cents, and above the 200-day moving average of 61.752 cents.
The market was overdone to the downside and Monday's upward correction may have been a natural response to significant losses over the past several weeks, said West Oak Commodities analyst Tom Tippens.
He referred to the hog supply buildup since last summer that pressured market-ready, or cash, hog prices for two months and dropped future's from their early-August highs.
CME lean hogs further gained upward momentum, partly driven by last Friday's higher cash prices that turned lower on Monday morning in light volume. [Still in the face of record high hog slaughters, pork demand is expected to remain solid over the next few weeks as National Pork Month in October gets underway.
Live Cattle Turn Lower
Fund liquidation and profit-taking ahead of slaughter-ready, or cash, cattle prices later this week snapped CME live cattle's three-day winning streak, said traders.
They said that some investors sold CME live cattle futures and simultaneously bought lean hog contracts.
October live cattle finished 1.257 cents per pound lower at 107.825 cents, and below the 20-day moving average of 107.930 cents. December closed 1.825 cents lower at 113.425 cents, and below the 100-day moving average of 114.561 cents.
Last week the bulk of cash cattle in the U.S. Plains traded at $108 per cwt, generally steady with the week before.
Although packer profits remain exceptional, they may resist paying up for cattle given the highest slaughter of the year last week - which implies ample supplies, said traders and analysts.
They said processors also might draw from cattle contracted against the futures market.
Furthermore, beef demand faces headwinds as moderating fall temperatures in the Plains allow animals to gain weight faster, creating more beef tonnage to compete with abundant pork and chicken supplies.
Technical selling, live cattle futures' retreat and steady-to-lower cash feeder cattle prices sank CME feeder cattle contracts.
October ended 1.875 cents per pound lower at 150.350 cents.