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CME update: cattle futures ease on concerns of slaughterhouse closures

31 March 2020

US cattle futures weakened on 30 March as concerns mounted over slaughterhouses closures due to coronavirus.

According to two stories from Reuters, traders worry that shutdowns could back up supplies of livestock by restricting and removing markets for the animals.

CME June live cattle finished down 0.350 cent at 89.075 cents per pound, while the nearby April contract fell 1.750 cents to 99.200 cents. CME May feeder cattle futures settled down 0.025 cent at 120.900 cents a pound.

Live cattle futures dropped 3.5 percent on the Chicago Mercantile Exchange over the last three weeks, while prices for beef that meat companies ship to wholesale buyers jumped about 20 percent.

Futures sank as managed funds liquidated long positions, or bets prices will rise, said Cassie Fish, a beef expert who formerly worked for Tyson. It was the market's biggest event-driven decline in more than 45 years, she said.

"They decided to get out," Fish said. "It was like a stampede."

Farmers and processors use futures to offset the risk of producing meat, and futures are intended to reflect the underlying cash market. April cattle futures ended last week at a record $18 to $19 under the cash market, according to consultancy AgResource.

Futures traders seem convinced that the coronavirus will disrupt US meat processing, said Dennis Smith, commodity broker for Archer Financial Services in Chicago.

"They seem to be dialling in a worst-case scenario going into the peak of this virus," he said.

Weaker wholesale meat prices added pressure to futures, analysts said. The decline indicates that consumers may be scaling back hoarding at grocery stores after stocking their freezers with meat, they said.

Boxed beef prices softened after climbing recently due to the surge in demand at supermarkets.

Margins for beef packers eased too, after setting a record high of more than $600 per head of cattle last week, according to HedgersEdge.com.

Read more about these stories here and here



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