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CME update: US cattle futures rise as wholesale meat prices strengthen

04 May 2020

US live cattle futures closed higher on Friday after hitting a three-week high, bolstered by stable cash cattle values and climbing wholesale beef prices as labour shortages slow the speed of slaughter.

According to Reuters, US traders report that new-month buying by speculators may have supported the upswing.

Chicago Mercantile Exchange June live cattle futures settled up 1.300 cents at 87.250 cents per pound, paring gains after climbing the daily 3-cent limit to 88.950 cents, the contract's highest since 8 April.

CME August feeder cattle settled up 1.150 cents at 127.650 cents per pound.

Futures surged on reports that live cattle traded as high as $105 per cwt in Texas, Kansas and Nebraska. However, cash cattle also traded at $95 per 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 percent 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 USDA, 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.

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