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CME update: live cattle futures close lower amid easing beef prices

15 May 2020

US live cattle futures ended mostly lower on 14 May as wholesale beef prices began falling from their previous high.

Reuters reports that the retreating wholesale price comes after the US improved its slaughter pace, generating more meat supplies.

Chicago Mercantile Exchange (CME) August live cattle futures settled down 1.425 cents at 97.0 cents per pound. Front-month June bucked the trend, settling up 0.250 cent at 94.125 cents. CME August feeder cattle ended down 2.025 cents at 131.050 cents per pound.

The daily kill at US meat-packing plants has begun to rebound for both cattle and hogs, after the coronavirus pandemic caused widespread worker shortages in April. The US Department of Agriculture (USDA) estimated Thursday's kill at 92,000 head of cattle, the most since 16 April, and 372,000 hogs.

Because of this improved pace, wholesale beef prices dropped. Late on Thursday, the USDA reported the cutout value for choice beef <BEEF-US-CH> at $450.92 per cwt, down $15 from a day earlier and the second straight decline after the historic high set on 12 May at $475.39.

"Our slaughter is better than a week ago, [and] better than two weeks ago. It probably won't get back to last year's levels any time soon, but it is hurting the cutout values," said Brian Hoops, president of Midwest Market Solutions.

A backlog of market-ready cattle at feedlots remains. Traders are worried about oversupply, cite an uncertainty about consumers’ appetite for high-priced beef.

"There is a real concern in the industry that not only are we backing up cattle ... but maybe some consumer demand is starting to back off, Hoops said.

On 28 April, President Trump invoked the 1950 Defense Production Act and mandated meat packing plants remain open during the pandemic to offset fears of meat shortages. The coronavirus pandemic has temporarily shuttered at least 30 meat packing plants over the past two months.

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