Chicago Mercantile Exchange lean hog futures fell about 2 percent in a technical selloff on Tuesday, easing from an earlier two-month high in a reversal that could portend further declines, traders and analysts said.
Live cattle and feeder cattle futures each dropped to the lowest levels in about two weeks on chart-based selling amid abundant supplies of both cattle and hogs.
Hog futures had climbed in the previous two sessions and reached fresh highs early on Tuesday, before turning lower. CME December hogs contract settled down 1.525 cents at 62.175 cents per pound, off their high of 64.500 cents.
"We got to the level where we made new highs and there was a vacuum below us," said Zaner Ag Hedge analyst Ted Seifried said. "Today's high will be a big resistance target going forward. We'll probably see some follow-through (selling) tomorrow."
Cash hogs prices in the top Iowa and southern Minnesota market were up $1.75 at $61.41 per cwt, according to the U.S. Department of Agriculture.
Gains in the cash hog market have buoyed futures but the potential gains likely will be limited by a nearly record-large U.S. hog herd.
Cattle on Feed Expectations
CME December live cattle futures were down 0.850 cent at 115.975 cents per pound, lowest since Oct. 6. CME November feeder cattle were off 2.125 cents to 152.425 cents, lowest since Oct. 3.
"Feeders all day were struggling to get up and over some resistance and failed to do that, and some technical selling came in toward the end and pushed us down," Seifried added.
Traders were beginning to square up their positions ahead of a monthly USDA Cattle on Feed report due on Friday.
Analysts polled by Reuters expected USDA to show 2.046 million cattle placed on feed for fattening last month, a figure that would be up 8 percent over September 2016.
More placements would suggest feedlots were aggressive buyers and will have more animals reaching slaughter weight and available to beef packers early in 2018.