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CME update: cattle futures buoyed by economic optimism and discount to cash prices

28 May 2020

US cattle futures rose for a second day in a row on 27 May as easing COVID-19 restrictions across the US boosted optimism about the general outlook for the economy and beef demand.

Reuters reports that US stocks rose, with the S&P500 closing above 3,000 points for the first time since 5 March. Traders said that easing lockdowns lifted investor optimism.

The Chicago Mercantile Exchange (CME) spot live cattle contract climbed above the 100-cent mark, a key technical level not breached since 31 March, lifted by its steep discount to cash cattle prices.

"Speculative short covering and technical buying, and futures' big discount to cash were the supportive factors today," said Doug Houghton, analyst at Brock Capital Management.

"There is also economic optimism coming out of Memorial Day, with stocks up again, businesses reopening and states lifting their COVID-19 restrictions."

CME June live cattle ended 1.400 cents higher at 100.800 cents per lb, while actively traded August rose 1.475 cents to 100.725 cents per lb.

A light to moderate number of cattle has traded at central and southern US Plains feedlot markets this week at $115 to $120 per cwt, well above the June contract's closing price, which is equivalent to $100.80 per cwt. Cash and futures prices should converge further as the spot contract nears expiration.

Feeder cattle futures followed live cattle higher, with benchmark August futures up 0.725 cent at 134.025 cents per lb.

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