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CME update: cattle futures end mostly lower, signalling an end to the surge

26 March 2020

Benchmark June live cattle futures on the Chicago Mercantile Exchange closed lower on 25 March for the first time in five sessions.

According to reporting from Reuters, the market has paused after a significant surge driven by increased retail beef prices.

Wholesale beef prices jumped and packer profit margins sky-rocketed this week as the coronavirus pandemic prompted stay-at-home orders in nearly 20 US states. The move caused consumers to stockpile meat and other groceries.

Cattle futures eased on Wednesday as traders paused to consider how long the beef boom would last.

"People are trading cautiously," said Altin Kalo, agricultural economist for New Hampshire-based Steiner Consulting, adding, "Now that we've had this big spike, how much do (beef prices) start to come back, especially as the food service begins to slow down significantly?"

CME's most-active June live cattle futures contract settled down 0.700 cent at 96.325 cents per pound. The thinly traded April contract bucked the lower trend, however, rising 2.300 cents at 108.450 cents, reflecting strength in the cash cattle market.

CME May feeder cattle futures settled down 0.400 cent at 129.100 cents a pound.

Profit margins for beef processors eased slightly to $588.15 per head of cattle on Wednesday, after reaching a record high of $611.10 on Tuesday, according to livestock marketing advisory service HedgersEdge.com. That was up from $134.15 on March 13, less than two weeks ago.

"Right now meat supplies are plentiful," Kalo said. This week's rally in hogs and cattle futures, he said, "is more trying to resolve some of the bottlenecks, rather than trying to ration the supply."


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