CME update: cattle futures slide after three days of gains
US cattle futures closed lower on Tuesday in a profit-taking setback after three sessions of gains.
6 May 2020
2 minute read
According to Reuters, the gains were fuelled by rising meat prices and concerns of meat shortages as multiple processing plants closed due to coronavirus infections among workers.
"From a technical standpoint, the market’s worthy of a little bit of a correction," said Tom Fritz, analyst at EFG Group.
June live cattle futures settled down 1.6 cents at 86.475 cents per pound. August feeder cattle dipped 0.725 cent to 128.250 cents per pound.
The market had seen support from historically high beef and pork prices, and packer margins remain strong.
Estimated US beef packer margins fell to $645.50 per head on 5 May, from Monday's $722. Beef packer margins were $118 a year ago, according to livestock marketing advisory service HedgersEdge.com LLC.
Meat processing capacity remains unclear, as more than 20 plants have closed due to coronavirus illnesses among workers.
US President Donald Trump has declared meat processing essential, but analysts say workers are still afraid to go back to work, even with safety measures and limited production.
"The workers are spooked to come to work," said Don Roose, president of US Commodities. "The packer's trying to come up with protocols to make the workers feel more comfortable that it's a safe environment."
The bottleneck in meat processing has led some grocery retailers and restaurants to limit meat purchases.
"You've got a tightness developing in beef and pork, at the consumer level, maybe even a shortage situation," said Roose. "You're going to run into certain cuts just not going to be there."
USDA reported that Monday's daily cattle slaughter was at 75,000 animals - down 36.4 percent from a year earlier - even as the US grilling season grows closer.
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