Chicago | Reuters — U.S. live cattle futures closed higher on Friday after touching a three-week top, buoyed by firm cash cattle values and surging wholesale beef prices as labor shortages slow the U.S. slaughter pace, traders said.
New-month buying by speculators may have also lent support, they said.
Chicago Mercantile Exchange June live cattle futures settled up 1.3 cents at 87.25 cents/lb., paring gains after climbing the daily three-cent limit to 88.95 cents, the contract’s highest since April 8 (all figures US$). CME August feeder cattle settled up 1.15 cents at 127.65 cents/lb.
Futures surged on reports that live cattle traded as high as $105/cwt in Texas, Kansas and Nebraska. However, cash cattle also traded at $95/cwt.
Both prices represented a premium over nearby CME live cattle futures. But the unusual $10 range in trades reflects highly variable demand as meat processors struggle to staff facilities as the coronavirus sickens workers. Some 20 plants in North America have closed in recent weeks.
“With these plant disruptions, those markets might as well be on different planets. It’s just a sign of how disjointed and unusual a situation that we are in,” said Derrell Peel, agricultural economist at Oklahoma State University.
As the weekly cattle slaughter dwindled to an estimated 378,000 head through Friday, down 38 per cent from a year ago, average beef packer margins topped an eye-popping $700 per head this week, according to livestock marketing advisory service HedgersEdge.com LLC.
Daily boxed beef cutout values estimated by the U.S. Department of Agriculture, an indication of wholesale beef prices, have soared as well. However, Peel cautioned that the market was more complicated.
“I don’t care what the boxed beef price goes to. If your plant is shut down and you are not producing anything, there is no revenue there,” Peel said, adding that meat packers faced costs, such as the expense of cleaning shuttered plants, that are not reflected in gross margins.
CME lean hog futures closed sharply higher, with the front two contracts settling up the daily 3.75-cent limit on rising wholesale pork prices and robust export demand.
“The cut-out market has been incredibly strong; exports this week were huge,” said Jeff French, analyst with Top Third Ag Marketing.
Chicago Mercantile Exchange benchmark June lean hog futures settled up 3.75 cents at 62.7 cents/lb. Daily limits will widen to 5.5 cents for Monday’s session.
USDA reported export sales of U.S. pork in the week ended April 23 at 50,300 tonnes, a three-week high.
— Julie Ingwersen is a Reuters commodities correspondent in Chicago.