U.S. livestock: CME feeder cattle futures jump as grain costs tumble

CME August 2021 feeder cattle (candlesticks) with 20-, 50- and 100-day moving averages (pink, brown and dark red lines). (Barchart)

Chicago | Reuters — Chicago Mercantile Exchange feeder cattle futures climbed on Tuesday as a steep slide in grain prices made animal feed costs look cheaper, traders said.

Traders are keeping a close eye on the grain markets after supply fears drove prices to eight-year highs during the spring. Corn and soy futures surged last week when the U.S. Department of Agriculture (USDA) issued lower-than-expected plantings estimates but tumbled on Tuesday on improving U.S. crop weather.

High feed costs can squeeze profit margins for cattle and hog producers and sometimes prompt them to reduce herd sizes or raise animals to lighter weights. Livestock producers hope favourable U.S. crop weather leads to above-average U.S. corn and soybean yields to supply the sector with more feed.

With crop plantings lower than expected, that leaves “any relaxation in feed prices entirely dependent on the attainment of at least trend-type yields,” said Joel Karlin, analyst for Western Milling.

CME August feeder cattle surged 3.575 cents to 160.625 cents/lb. (all figures US$). September feeders advanced 3.3 cents to 162.725 cents/lb.

August live cattle futures rose 0.4 cent, to 122.4 cents/lb.

Strong domestic and export demand for U.S. beef has helped underpin cattle futures, analysts said.

From January to May, total U.S. beef exports were up about 15 per cent from a year earlier, according to the latest official data from the USDA.

“Even if domestic beef demand slides in the near future, exports appear more than able to make up for it,” said Karl Setzer, commodity risk analyst for AgriVisor.

In the pork market, live hog futures for August delivery jumped 2.125 cents, to 102.35 cents/lb. Deferred hog futures finished weaker.

— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.

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