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Live cattle futures at the Chicago Mercantile Exchange (CME) soared to all-time highs on Wednesday, driven by meatpackers’ rush to secure livestock amid tightening supplies, according to brokers. Ranchers have been reducing their herds due to high feed costs and drought in the western U.S., resulting in higher prices for cattle. Additionally, adverse weather conditions in the north have caused remaining animals to weigh less, further straining supplies. The CME April live cattle futures set a new record high for a front-month contract for the second consecutive day, reaching 174.325 cents per pound. This surpasses the previous record set in 2014.
Demand for beef remains robust, supporting both futures and cash prices, as indicated by the U.S. Department of Agriculture (USDA) data showing a $3.38 jump to $298.48 per hundredweight for choice cuts of beef shipped to wholesale buyers in large boxes on Wednesday. Meatpackers have increased slaughter numbers, processing an estimated 125,000 cattle, up 2,000 from the previous week, according to the USDA. Despite offering higher cash prices for cattle to secure supplies, packers’ margins remain favorable, with estimated margins per head of cattle reaching $50.75 on Tuesday, compared to $40.45 on Monday and $59.15 a week earlier, as reported by HedgersEdge.com.
The tight supply situation has led to a scramble among meatpackers to secure sufficient cattle numbers, with the president of brokerage U.S. Commodities, Don Roose, noting that “the packer is scrambling for the cattle numbers that are tight.” Meanwhile, CME feeder cattle futures also ended higher, with the May contract rising by 0.750 cent to 208.575 cents per pound. The record-breaking surge in live cattle futures reflects the challenges faced by meatpackers in procuring enough supplies to meet demand, amid reduced herds and adverse weather conditions impacting animal weights.
source :Reuters
