Chicago | Reuters — U.S. cattle and hog futures retreated on Tuesday in a profit-taking setback after three sessions of gains that were fueled by rising meat prices and concerns about meat shortages as several packing plants have closed due to coronavirus infections among workers.
Benchmark June lean hog futures corrected after gaining nearly 18 per cent over the prior three sessions, while June live cattle fell following a 4.5 per cent three-session rise.
“From a technical standpoint, the market’s worthy of a little bit of a correction,” said Tom Fritz, analyst at EFG Group.
Chicago Mercantile Exchange (CME) June hogs settled down 1.225 cents at 64.275 cents/lb. (all figures US$).
June live cattle futures settled down 1.6 cents at 86.475 cents/lb. August feeder cattle dipped 0.725 cent to 128.25 cents/lb.
The market had seen support from historically high beef and pork prices, and packer margins remain strong.
Estimated U.S. beef packer margins fell to $645.50 per head Tuesday, from Monday’s $722. Beef packer margins were $118 a year ago, according to livestock marketing advisory service HedgersEdge.com LLC.
Pork packers saw margins reach $103.95 a head, compared to $79.95 Monday and negative $5 a year ago.
Concerns that renewed tariff jockeying between the United States and China might upset U.S. pork exports to the country.
Meat processing capacity remains unclear, as more than 20 plants have closed due to coronavirus illnesses among workers.
U.S. President Donald Trump has declared meat processing essential, but analysts say workers are still afraid to go back to work, even with safety measures and limited production.
“The workers are spooked to come to work,” said Don Roose, president of U.S. Commodities. “The packer’s trying to come up with protocols to make the workers feel more comfortable that it’s a safe environment.”
The bottleneck in meat processing has led some grocery retailers and restaurants to limit meat purchases.
“You’ve got a tightness developing in beef and pork, at the consumer level, maybe even a shortage situation,” said Roose. “You’re going to run into certain cuts just not going to be there.”
On Monday, the U.S. Department of Agriculture reported the daily hog slaughter of 292,000 animals, 37.6 per cent fewer than the same period a year earlier.
Plant closures are causing problems for the beef sector, too. USDA reported that Monday’s daily cattle slaughter was at 75,000 animals — down 36.4 per cent from a year earlier — even as the U.S. grilling season grows closer.
— Christopher Walljasper reports on agricultural commodities for Reuters from Chicago.