U.S. hog futures turned moderately lower Thursday on profit-taking and indications that futures were technically overbought, which erased an earlier six-month high, said traders and analysts.
Chicago Mercantile Exchange (CME) hogs hit a relative strength index (RSI) of 73.33. A RSI of 70 is viewed as technically overbought and subject to a downward correction.
Investors were also nervous about December hogs' premium to the CME lean hog index at 78.54 cents (all figures US$).
December hogs settled at 83.7 cents per pound, down 0.125 cent after peaking at a nine-month top. February closed 0.625 cent lower at 86.95 cents.
And sellers viewed lower cash hog prices Thursday morning as a sign that cash prices may be about to top out as packers fill this week's slaughter orders.
But, others expect cash hog prices to trend higher amid tight supplies.
The average hog price in the most-watched Iowa/Minnesota hog market Thursday morning was $78.64 per hundredweight (cwt), 90 cents lower than on Wednesday, according to the U.S. Department of Agriculture.
"Some people must be thinking that the morning Iowa data is on very low volume and thus not representative of what we will get later this afternoon when cash may come in higher," a trader said.
Cattle rebound on beef quotes
Live cattle futures recovered from Wednesday's fall, lifted by higher wholesale beef values that some believe may lend support to cash cattle prices, analysts and traders said.
The wholesale price for choice beef on Thursday morning was $196.96/cwt, $1.23 higher than Wednesday, said USDA.
Cash bids in the U.S. Plains were at $124/cwt against $128 to $130 asking prices from sellers. A small number of dressed-basis cattle moved in Nebraska at $202/cwt, about steady with last week, a feedlot manager said.
However, processors are showing little interest in buying cattle because of their poor margins, forcing them to cut slaughter rates while drawing from supplies purchased through pre-negotiated sales.
HedgersEdge.com put the average beef packer margin for Thursday at negative $76.70 per head, compared with negative $70.45 on Wednesday.
"Supposedly packers are not needing very many cattle for at least the next two weeks and don't need to be in the cash market," said Wagnon Commodities owner Lynn Wagnon.
Still others said processors may be forced to raise bids for supplies with the U.S. cattle herd at its lowest in 60 years following back-to-back droughts.
December live cattle closed 0.375 cent/lb. higher at 128.2 cents. February ended up 0.45 cent at 132.1 cents.
CME feeder cattle rallied on live cattle market advances, technical buying and lower corn prices.
January closed 0.675 cent/lb. higher at 146.75 cents. March finished at 149.55 cents, up 0.25 cent.
-- Theopolis Waters writes for Reuters from Chicago.