Chicago | Reuters — Chicago Mercantile Exchange live cattle futures stormed to an all-time high on Wednesday as meatpackers scrambled to buy livestock at a time when supplies are tightening, brokers said.
Ranchers have reduced their herds due to high feed costs and drought in the western U.S., forcing packers such as Tyson Foods and Cargill to pay more for cattle. Remaining animals weigh less following cold and snowy weather in the north, brokers said.
“The numbers are just plain tight,” said Brad Kooima, president of Kooima Kooima Varilek Trading.
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CME April live cattle futures set an all-time high for a front-month contract for a second consecutive day, hitting 174.325 cents/lb. (all figures US$). Before this week, the record high for a nearby contract was set in 2014.
April live cattle ended up 1.975 cents at 174.275 cents/lb. June cattle futures finished 0.9 cent higher at 164.85 cents/lb., after touching a life-of-contract high of 165.05 cents.
Strong demand for beef has helped lift futures and cash prices, brokers said.
Prices for choice cuts of beef shipped to wholesale buyers in large boxes jumped by $3.38, to $298.48 per hundredweight on Wednesday, U.S. Department of Agriculture (USDA) data showed. Meatpackers, meanwhile, slaughtered an estimated 125,000 cattle, 2,000 more than a week ago, USDA said.
“Even though packers are being forced to put better cash on the table to secure enough supplies, their margins are still excellent,” said Dan Norcini, an independent livestock trader.
Estimated margins were $50.75 per head of cattle on Tuesday, compared to $40.45 per head on Monday and $59.15 per head a week earlier, HedgersEdge.com said.
“The packer is scrambling for the cattle numbers that are tight,” said Don Roose, president of brokerage U.S. Commodities.
CME feeder cattle futures also ended higher, with the May contract rising 0.75 cent to 208.575 cents/lb.
CME April lean hog futures fell 0.75 cent, to 72.3 cents/lb., while most-active June closed at 87.55 cents/lb., down 0.3 cent.
— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.
