August 11, 2014

 

US cattle prices decline from high record levels of July 2014

 

 

US cattle prices are falling from the record highs reached in July 2014, with investors expecting beef consumption to cool in the short term, according to a Wall Street Journal report.

 

Live cattle for August delivery fell 3% last week to US$1.5255/pound on the Chicago Mercantile Exchange, the lowest closing price for a front-month contract since July 18. Futures for feeder cattle, animals which are being fattened for slaughter, lost 2.2% about a week ago, to US$2.15325/pound.

 

Persistent drought in the central US has curbed cattle supplies, causing prices to surge to the highest level ever recorded. Currently, during the hottest time of the year, when red-meat consumption typically slips, market watchers are looking for signs of lower demand for burgers and steaks.

 

"Livestock markets have run up all summer long, and now traders are wondering how much of that reflected supply fundamentals and how much of it was just exuberance" as bullish bets continued to mount, said Altin Kalo, an economist with food-industry advisory firm, Steiner Consulting Group.

 

Money managers increased their bets on higher prices by 3.4% in the week ending August 5, to a three-week high, according to the Commodity Futures Trading Commission.

 

Fundamentally, the market is facing its smallest herd since 1951. While extremely dry conditions in major cattle-raising states like Texas have moderated this year, some ranchers are retaining breeding animals to expand their herds, instead of selling them for slaughter.

 

In addition, beef is facing competition from pork and poultry, as the cheapest feed-grain costs in years are likely to result in more and heavier animals. If pork and poultry supplies grow, prices for those proteins in stores could further undercut beef.

 

Supplies of pork and poultry could also get a boost due to international sanctions. Russia's prime minister, Vladimir Putin, said that the nation would curb imports of US beef, pork, poultry and other food items.

 

"If you see exports of poultry and pork back up in the US, that pressure on prices from the increased supplies could trickle across the meat case," said Don Roose, the president of US Commodities in West Des Moines, Iowa.

 

Wholesale prices for choice-grade beef reached an all-time high of US$2.6366/pound on July 31, compared with US$1.2786/pound for pork and US$1.1275/pound for the benchmark wholesale chicken price, according to USDA data.

 

Beef prices fell to US$2.6045/pound on August 8 but are still more than double the price of chicken or pork.