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CME update: cattle futures sink as corn prices skyrocket

01 July 2020

US cattle futures drifted lower on 30 June, facing pressure from a surge in Chicago Board of Trade (CBOT) corn futures that will likely squeeze profit margins for livestock producers.

"The rise in feed costs changes the dynamics in the industry. It cuts into profits," said Dan Norcini, an independent livestock trader.

Reuters reports that Chicago Mercantile Exchange (CME) August live cattle futures settled down 0.200 cent at 96.275 cents per pound while August feeder cattle fell 0.650 cent to end at 132.850 cents per pound.

CBOT September corn futures rose nearly 4 percent on 30 June and hit their highest in nearly three months. The rise follows a USDA report showing that farmers planted 92.0 million acres of feed grain this spring, which fell below a range of analyst expectations. The figure was also 5 million acres below the USDA March forecast.

"Your break-even equation says, 'I have got to pay less for feeders, with corn going up the way it is,'" said Alan Brugler, president of Nebraska-based Brugler Marketing & Management.

Cattle futures found underlying support from signs that wholesale beef prices were stabilising after recent weakness. Select beef cuts were up 76 cents at $201.47 per cwt in the USDA's midmorning boxed-beef report, although the agency's afternoon revisions showed an 81-cent decline, to $199.90 per cwt. Choice cuts ended down $1.39 on Tuesday afternoon, at $206.97 per cwt.

Reuters reports that the US daily slaughter pace has rebounded to pre-coronavirus levels.

Cattle slaughter on Tuesday was estimated at 121,000 head, matching Monday's kill as the highest daily slaughter since March.

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