U.S. livestock: Cattle limit up on beef demand, strong packer margins

Cash hog prices up, pork cutout down

CME May 2020 feeder cattle with 20-, 50- and 100-day moving averages. (Barchart)

Chicago | Reuters — U.S. live cattle futures settled up their expanded daily limit on Tuesday as traders continued to react to soaring profit margins for beef packers that should lift prices in the cash cattle market this week.

Retail demand for meat has surged as fears of the COVID-19 coronavirus prompt consumers to stock up on supplies, super-charging margins.

“The knee-jerk reaction in this coronavirus deal was to sell the livestock markets. They thought demand and cut-outs would fall drastically, and we saw the exact opposite. So the market is correcting itself,” said Joe Vaclavik, president of Standard Grain, a brokerage.

Profit margins for beef processors reached a record high of $611.10 per head of cattle on Tuesday, according to livestock marketing advisory service HedgersEdge.com. That was up from $580.70 on Monday and $317.10 a week ago (all figures US$).

Chicago Mercantile Exchange June live cattle futures settled up the expanded 4.5-cent daily limit at 97.025 cents/lb. and CME’s May feeder cattle futures contract ended up 6.75 cents at 129.5 cents/lb.

The exchange will keep daily limits at 4.5 cents for live cattle futures and 6.75 cents for feeder cattle futures on Wednesday, except for the spot March feeder cattle contract, which expires this week. The CME this week expanded the daily limit for March feeders to 10 cents/lb. “to ensure that trading is not restrained.”

CME lean hog futures closed higher but trailed the gains in cattle futures. The CME June lean hog futures settled up 2.05 cents at 73 cents/lb. Limits for lean hog futures will revert to three cents for Wednesday’s trade.

The U.S. pork cutout fell by $1.46 on Tuesday afternoon but cash hog prices in the Iowa and southern Minnesota market rose by $1.52, according to the U.S. Department of Agriculture.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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