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CME update: US cattle futures rally due to bargain-buying

09 April 2020

US cattle futures rose for a second session on 8 April as investors took advantage of steep discounts in futures prices.

According to reporting from Reuters, Chicago Mercantile Exchange (CME) most actively traded live cattle futures ended the day up 1.875 cents at 86.675 cents per pound, while most actively traded feeder cattle futures settled up 5.575 cents at 119.375 cents a pound.

Market analysts report that cattle futures have been hugely volatile in recent months as the COVID-19 pandemic causes widespread closures of the global food service sector, a major buyer of US beef.

But the pricing disconnect between futures prices and the cash market is adding fuel to the market's volatility and frustration among cattle producers, even as packer margins remain strong. Cash cattle traded in Kansas and Texas at $105 per hundredweight on Wednesday, traders said, down $7 from the bulk of last week's trade at $112.

"Credit card data recently released shows that restaurant business is starting to stabilise across the country, down 73 percent from normal levels," Arlan Suderman, chief commodities economist for INTL FCStone, wrote in a note to clients. "That reduces demand for meat, which the industry is trying to figure out."

Consumer spending on fresh beef at retail grocers is up. The amount of dollars spent on fresh beef was up 51.6 percent for the four-week period ended 28 March, compared with a year earlier, according to Nielsen data.

However, increased demand isn’t making up for the volume of meat normally consumed by the food service supply chain, market analysts said. They note early signs of price-wary consumers as shoppers opted for less expensive cuts of meat instead of more expensive items used for the grilling season in the United States.

Consumer spending on fresh ground beef was up 61.6 percent for the four-week period ended March 28, compared with a year earlier, according to Nielsen data. Consumer spending on fresh beef roasts was up 50 percent, the data found.

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