Chicago Mercantile Exchange live cattle futures fell sharply for a second straight session on Tuesday, pressured by technical selling and weakening cash cattle prices, traders said.
Large numbers of slaughter-ready cattle are expected to continue flooding the market over near term and futures prices have slumped in anticipation of a cash price decline.
The most-active August contract settled 1.500 cents lower at 100.400 cents per pound, its lowest since April 4. June cattle ended down 1.650 cents at 102.975 cents.
So far this week, a small number of cattle at U.S. Plains feedlot markets have traded from $112 to $118 per cwt, down sharply from last week's sales of mostly $122 per cwt, traders said. Prices are likely to remain weak when the bulk of cattle on offer are sold later this week, they said.
"This wall of cattle is coming to a head. We've got a monster number of cattle on feed," said analyst Craig VanDyke of Top Third Ag Marketing.
"We've seen cash cattle top out in the first week of May in the past three years and as of right now that looks to be holding true," he added.
Large cattle purchases by packers over the past two weeks gave some traders the impression that buyers would be less aggressive this week, even as packer margins remain robust.
The average beef packer margin on Tuesday was estimated at $162.95 per head, up from $135.45 a week ago, according to livestock marketing advisory service HedgersEdge.com.
CME feeder cattle futures followed live cattle lower, with actively-traded August ending 1.925 cents lower at 138.450 cents per pound.
Lean hog futures dropped on technical selling and fund liquidation, and as the futures market shed some of its premium to cash hog prices.
CME June hogs fell 1.425 cents to 74.725 cents per pound, with selling accelerating as the contract fell below key chart points including its 20- and 50-day moving averages. July hogs ended down 1.025 cents at 77.700 cents.