Chicago Mercantile Exchange live cattle futures firmed on Monday as drought conditions across the U.S. Southern Plains continue to degrade grazing land, though gains were limited by smaller-than-expected declines in feedlot placements, analysts said.
Ranchers have been pushing cattle into feedlots at higher rates as parched grassland struggles to support herds, a trend that is unlikely to change quickly, according to Alan Brugler, president of Brugler Marketing.
“You’re going to need feeders to go a little higher and grass to get a little better, to get these guys to retain heiffers, I think,” he said. “We are still in that declining part of the cattle cycle, where cattle are going to be a little more scarce.”
The U.S. Department of Agriculture on Friday afternoon reported 1.629 million head of cattle were placed in feedlots in June, down 2% from a year earlier. Analysts surveyed by Reuters on average expected a larger drop in placements of 5%, to 1.586 million head.
CME August live cattle futures added 0.375 cents to 137.750 cents per lb, while the most-active October contract firmed 0.350 cents at 143.350 cents, after reaching its highest since May 5.
Wholesale beef prices firmed on Monday, with choice cuts adding $1.38 to $268.50 per hundredweight, according to the U.S. Department of Agriculture (USDA), while select cuts gained $1.02 to $243.52 per cwt.
CME feeder cattle futures eased as corn prices rebounded from last week’s losses, with CME September feeder cattle futures easing 1.800 cents to 182.675 cents per lb.
Meanwhile, CME lean hog futures fell below firming cash hog prices, though deferred contracts gained on expectations of tighter market-ready supplies.
The CME Lean Hog Index, a two-day weighted average of cash hog prices, climbed to $118.22 per hundredweight (cwt), surpassing CME’s nearby August lean hog futures, which settled 1.475 cents lower at 117.225 cents per lb. The most-active October hogs fell 2.200 cents to 94.125 cents. (Reporting by Christopher Walljasper; Editing by Devika Syamnath)