Chicago | Reuters — U.S. lean hog and live cattle futures closed higher on Monday, as meat processing facilities began to open after closures of more than 20 plants due to coronavirus illnesses among workers.
Rising pork and beef cutout prices have also helped give futures a boost on Monday, said Mark Schultz, chief analyst at Northstar commodity.
In comparison, “futures in both cases are extremely low,” Schultz said. “They have room to go up.”
Monday’s trading came on the heels of growing market optimism last week, when China was a key buyer of U.S. commodities — with pork purchases accounting for nearly half of all sales, said Karl Setzer, commodity risk analyst for AgriVisor.
But those market hopes have since cooled, after the White House announced it was considering new tariffs on China in response to its handling of the COVID-19 outbreak, Setzer said.
Now, say investors, the market is trying to calculate how President Donald Trump’s mandate that U.S. meat processing plants remain open to protect the U.S. food supply during the coronavirus outbreak will impact packers’ shorter-term demand for hogs, chicken and cattle.
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.
“Trump issued this Defense Production Act order to get everybody back open, but it’s going to be a problem, maintaining a healthy workforce,” said Joe Vaclavik, president of Standard Grain.
There are already signs of trouble. Tyson Foods said on Monday that the coronavirus crisis will continue to idle U.S. meat plants and slow production, despite Trump’s order.
Tight meat supplies at grocers is emerging: Costco Wholesale Corp. said Monday it is limiting how much beef, pork and poultry products customers can buy. Kroger Co. has purchase limits on ground beef and fresh pork at some stores.
Chicago Mercantile Exchange June live cattle futures settled up 0.825 cents at 88.075 cents/lb. (all figures US$). CME August feeder cattle settled up 1.325 cents at 128.975 cents/lb.
Chicago Mercantile Exchange benchmark June lean hog futures settled up 2.8 cents at 65.5 cents/lb.
— Reporting for Reuters by P.J. Huffstutter and Christopher Walljasper.