Chicago | Reuters—Chicago Mercantile Exchange live cattle and feeder cattle futures stormed to contract highs on Friday, as tight U.S. supplies drove cash prices to records this week, traders said.
Inventories are at their lowest levels in decades after drought in recent years dried up pasture lands used for grazing and pushed ranchers to send more cattle to slaughter.
Ranchers and feedlots that fatten cattle before slaughter are now demanding steep cash prices from meatpackers that must increasingly compete to buy livestock to process into beef.
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Seasonal weakness and recent rains across the Prairies pressured feed grain prices according to a Moose Jaw-based trader.
“The feedlots have quite a bit of leverage,” said Austin Schroeder, analyst for Brugler Marketing & Management.
Cash prices reached about $222 to $223 per hundredweight (cwt) in Iowa and $218 per cwt in Texas and Kansas this week, up $5 to $6 from last week, brokers said. The increase pushed up futures prices, they said.
Upbeat payrolls data and gains in equities provided another boost, as a strong economy is thought to encourage beef demand, traders said. China also said it was evaluating a U.S. offer for trade talks, raising hopes for a thaw in the nations’ tariff conflict.
CME June live cattle futures LCM25 set a contract high of $211.925 cents per pound before closing up 1.45 cents at 211.100 cents.
August feeder cattle futures FCQ25 rallied 2.450 cents to end at 296.900 cents per pound. The contract set a high of $297.975 cents earlier in the session.
“The main story is the cash market,” Schroeder said.
Meat companies normally benefit from strong demand for beef heading into the Mother’s Day and Memorial Day holidays in May and the start of the summer grilling season, brokers said.
However, they were losing an estimated $137.45 for each head of cattle they slaughtered due to high prices, according to data from HedgersEdge.com.
Meatpackers slaughtered an estimated 87,000 cattle on Friday, down 27 per cent from a year earlier, the U.S. Department of Agriculture said. They slaughtered about 480,000 hogs, up four per cent from a year ago.
CME June lean hog futures LHM25 rose by 1.175 cents to close at 99.350 cents per pound.
