U.S. livestock: June live cattle limit up on soaring beef prices

Large supplies of hogs, cattle still loom over futures

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

Chicago | Reuters — U.S. live cattle futures closed higher on Tuesday, with nearby contracts rising the daily maximum, as surging wholesale beef prices and expectations U.S. beef and pork production would drop spurred speculative buying, traders said.

Chicago Mercantile Exchange (CME) June live cattle futures settled up 4.5 cents, the expanded daily limit, at 97.175 cents/lb., approaching Friday’s six-week high (all figures US$).

CME August live cattle finished up 4.5 cents at 101.7 cents, while August feeder cattle settled up 3.075 cents at 135.75 cents.

After the CME close, the exchange said it would raise the margins to trade live cattle futures by 4.2 per cent, effective after Wednesday’s session.

As meat-packing plants struggle with labour shortages due to the COVID-19 coronavirus pandemic, CME cattle and hog futures have been volatile as traders weigh support from soaring meat prices against pressure from huge back-ups of cattle and hogs in the country.

Beef prices took the spotlight on Tuesday. The choice boxed beef cutout rose on Tuesday afternoon to $475.39/cwt, up $6.81 from Monday and up about $46 from a week ago, according to the U.S. Department of Agriculture (USDA).

“The market is following the cutout. The cutout is ruling everything,” said Don Roose, president of Iowa-based U.S. Commodities.

In a monthly supply/demand report on Tuesday, USDA lowered its forecast of U.S. 2020 beef production to 25.76 billion lbs., down 1.68 billion from its April figure. For pork, the government cut its forecast to 27.44 billion lbs., down 1.6 billion from last month.

“They took an axe to the production estimates for 2020, which is not surprising,” said Altin Kalo, agricultural economist for Steiner Consulting.

Still, a large supply of cattle and hogs awaiting slaughter loom over the futures market. USDA projected that prices for steers would average $99-$100/cwt for the rest of 2020, below the price of CME August live cattle futures and deferred months.

“What they are saying is, you are going to have bigger numbers (of animals) coming at us,” Roose said.

CME lean hog futures rose on Tuesday along with cattle futures, with the June hog contract settling up 1.05 cents at 61.325 cents/lb.

— Julie Ingwersen is a Reuters commodities correspondent in Chicago.

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