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US cattle futures soar and beef prices increase

24 March 2020

US live cattle futures rose to their daily limit on 23 March as strong packer margins, increasing wholesale beef prices and expectations of higher cash cattle prices this week emerge.

According to reporting from Reuters, Benchmark June live cattle futures on the Chicago Mercantile Exchange settled up their 3-cent daily limit at 92.525 cents per pound and CME's May feeder cattle futures contract ended up 4.5 cents at 122.750 cents a pound.

Limits for Tuesday's session will expand to 4.5 cents for live cattle futures and 6.75 cents for feeder cattle futures, the exchange said.

Cattle futures surged as worries about the fallout from the coronavirus sent shoppers rushing to grocery stores to stock up on meat. However, the margin gains could correct soon. Andy Gottschalk, owner of HedgersEdge.com, thinks that margins will shrink as processors refill the pipeline for meat.

"It's caused by a scramble for short-term product, which is aggravated by hoarding by consumers,” he said. “You now have to replenish those empty shelves at the retail level and empty warehouses."

CME April live cattle futures, at 101.650 cents per pound, remain at a discount compared with cash cattle, which traded mostly at about $111 per hundredweight last week.

"Anyone who sees that is going to start covering," said Doug Houghton, analyst with Brock Associates.
Speculators held a small net short position in CME live cattle futures in the week ended 17 March, data from the US Commodity Futures Trading Commission showed, leaving the market prone to short-covering rallies.

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