LIVESTOCK-CME live cattle futures extend rally as beef prices climb

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Chicago Mercantile Exchange live cattle futures rose on Tuesday for a fifth straight session, led by high-flying wholesale beef prices, analysts said.

Feeder cattle futures also advanced but gains were muted as corn futures rallied, signaling higher costs to bring cattle up to market-ready weight.

CME June live cattle futures settled up 0.400 cent at 118.625 cents per pound, with August up 1.700 cents at 122.050 cents. CME August feeder cattle futures finished up 0.150 cent at 148.850 cents per pound.

Wholesale prices for choice cuts of beef rose $3.26 on Tuesday to $312.37 per cwt, the highest in nearly a year, while select cuts rose $2.58 to $296.34 per cwt, according to the U.S. Department of Agriculture.

Beef prices have been climbing steadily since mid-March, reflecting consumer demand ahead of the summer grilling season and the reopening of restaurants as the U.S. economy bounces back from the coronavirus pandemic.

“The barbecue season is never going to be better than this year,” said Terry Roggensack, analyst with The Hightower Report. “The government is telling us that the safest way to go back and see friends and family, or even have business get-togethers, is outside, in a barbecue setting,” he said.

However, he cautioned, beef demand could slow after the U.S. Memorial Day weekend, once retailers have booked the bulk of their needs.

Strong beef prices lifted packers’ profit margins to an estimated $752.50 per head of cattle by Tuesday, up from $685.70 a week earlier, according to livestock marketing advisory service HedgersEdge.com.

Yet cash cattle markets have languished in recent weeks due to capacity issues at slaughterhouses that some have tied to tight labor supplies and social distancing policies.

Meanwhile, CME June lean hog futures declined for a third straight session, following a contract high set last week. June hogs settled down 0.925 cent at 111.175 cents per pound.

Tight U.S. hog supplies continued to underpin the market, but some traders wondered whether futures have peaked for the time being.

“I think hogs have put in a major high. The June (contract) not following through today should make people nervous,” Roggensack said.

Traders await a monthly USDA crop report on Wednesday that will include the government’s first official grain supply and demand forecasts for the 2021/22 marketing year.