Among the few bucking the trend in the commodities space, livestock-related exchange traded notes are bouncing back as some traders pounce on an oversold area and short-covering helped maintain the momentum.
Since the November 10 low, the iPath Bloomberg Livestock Subindex Total Return ETN (NYSEArca: COW) surged 6.7%. COW was up 2.4% Thursday.
Meanwhile, on Thursday, CME live cattle futures gained 2.4% to $1.3445 per pound and CME lean hogs were up 1.2% to $0.5685 per pound.
COW includes a 61.7% tilt toward live cattle and 38.3% in lean hogs.
Cattle and hog prices experienced back-to-back selling for over a week after the Federal Open Market Committee meeting announcement and the better-than-expected October jobs report fueled speculation of a December rate hike. In the period between the FOMC announcement on October 28 through November 10, COW declined 13.9%.
“This whole break [lower]in cattle has been way too much selling, over the last couple days in particular,” Troy Vetterkind, owner of Vetterkind Cattle Brokerage, told the Wall Street Journal. “We’re still trying to find an equilibrium in cattle prices.”
Historically large pork and chicken supplies have pressured prices that retailers are willing to pay for meat and poultry products, dragging livestock prices lower over the past week. During the selling, hog futures hit a six-year low and cattle prices touched their lowest in a month on Tuesday.
Additionally, as prices bounced back, short-covering helped support both markets on the rebound. Investors with heavy short positions are covering, or buying back, their shorts in the event of share appreciation. Consequently, the additional buying momentum from short sellers covering their options contracts helped bolster prices even further.
iPath Bloomberg Livestock Subindex Total Return ETN
For more information on the commodities market, visit our commodity ETFs category.
Max Chen contributed to this article.