Chicago | Reuters — U.S. live cattle futures fell on Tuesday, with the August contract hitting its lowest in nearly a month as the U.S. slaughter pace picked up, sending more beef into retail channels, traders said.
Chicago Mercantile Exchange (CME) June live cattle settled down three cents at 95.3 cents/lb., while most-active August ended down 2.775 cents at 96.2 cents/lb. after dipping to 96 cents, the contract’s lowest since May 6 (all figures US$).
CME August feeder cattle futures settled down 2.7 cents at 133.425 cents/lb.
U.S. slaughterhouses are working through a backlog of cattle and hogs that built up this spring as COVID-19 sickened workers, forcing numerous facilities to shut down.
“The slaughter numbers have come back much faster than the industry anticipated. (Meat) packers have done a great job getting everybody back to work and working through these animals,” said Jeff French, analyst with Top Third Ag Marketing in Chicago.
Tuesday’s cattle kill totaled 113,000 head, the U.S. Department of Agriculture (USDA) said, and the weekly slaughter could reach 630,000 head, French said, not far below levels before the coronavirus pandemic began.
The cattle that are belatedly arriving at packing plants are heavier than normal, adding to beef supplies.
“Carcass weights are higher (than) a year ago. So we’ve got big cattle out there to move,” said Don Roose, president of Iowa-based U.S. Commodities. “That means we have more meat coming at the consumer,” Roose said.
Consequently, wholesale beef prices have been retreating from historic highs reached in mid-May, a factor that should pressure cash cattle prices. The choice boxed beef cutout, an indicator of wholesale prices, fell on Tuesday afternoon to $318.73/cwt, down $22.42 from Monday and down nearly $67 from a week ago, according to the USDA.
As profit margins for meat packers narrow, “they are going to be very reluctant to pay up for cash cattle,” French said.
CME lean hog futures closed mixed on Tuesday, with the front two contracts declining as the rising hog slaughter pace pressures wholesale pork prices.
CME June lean hogs ended down 2.2 cents at 52.4 cents/lb. while most-active July futures settled down 0.275 cent at 54.875 cents. Back months ended higher.
USDA reported the U.S. pork cutout down $6.67 at $74.37/cwt on Tuesday afternoon.
— Julie Ingwersen is a Reuters commodities correspondent in Chicago.