Chicago | Reuters — U.S. cattle and hog futures advanced on Wednesday as the markets recovered slightly from recent losses that traders said had dropped prices too far below the cash markets.
Futures prices have tumbled recently as major meat companies have shut slaughterhouses due to the spread of the new coronavirus among employees. The closures back up supplies of livestock, weighing on prices.
June live cattle futures were about $24 under cash prices at the start of the week, a significant discount, according to analysts (all figures US$).
“The discount’s just too big,” said Don Roose, president of Iowa-based broker U.S. Commodities.
June live cattle futures ended up 1.025 cents at 84.825 cents/lb. at the Chicago Mercantile Exchange. May feeder cattle futures rose 0.725 cent to 115.575 cents/lb.
CME June lean hog futures edged 0.675 cent higher to 44.625 cents/lb., after setting a contract low on Tuesday.
Smithfield Foods, the world’s biggest pork processor, said it would shutter two U.S. plants that process bacon and ham, after closing a separate hog slaughterhouse because of a coronavirus outbreak among employees.
Cargill confirmed it temporarily reduced work shifts at a beef plant in Fort Morgan, Colorado, to “minimize the impact of COVID-19,” the disease caused by the virus.
“While you’re slowing the kill capacity down, we’re not getting enough meat to the retail level,” Roose said.
Demand for meat at grocery stores has climbed as consumers are staying home to protect themselves from the contagious respiratory virus. Restaurant demand has evaporated as dining rooms have closed.
Meat processors have record large inventories of pork that was destined for restaurants and other food-service outlets and has not been sold, Dermot Hayes, Iowa State University agricultural economist, said on a conference call hosted by the National Pork Producers Council on Tuesday.
“There’s several weeks, possibly months, of supply,” he said.
— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago.