March 9, 2020

 

US cattle futures drop contract lows amid virus fears

 

 

US cattle futures further declined on Friday, fuelled by fears that the global coronavirus outbreak will slow economic growth and cut beef demand.

 

Losses in the market have accelerated as the virus has spread, with the most-active April live cattle futures contract down 17% in the past three weeks.

 

Financial markets view the virus, which causes a flu-like illness, as the catalyst that could interrupt the longest economic expansion on record, now in its 11th year. Traders fear such a disruption would hurt demand for beef, which is generally more expensive than pork and chicken.

 

"The market is now believing and pricing in the idea that the economy will be hit from the virus," said Rich Nelson, chief strategist for commodity broker Allendale in Illinois.

 

"Beef is the premium protein and is a bit more tied to the economy," Nelson added.

 

April live cattle tumbled 2.900 cents to 105.750 cents per pound at the Chicago Mercantile Exchange. June live cattle, the second-most-active contract, fell 2.625 cents to 100.025 cents per pound. April feeder cattle sank 3.600 cents to 130.050 cents per pound.

 

Weakness in the cash market, heavier cattle weights and bigger-than-expected slaughtering numbers added pressure to prices, traders said. Cash cattle this week traded at US$113 per cwt in Kansas and Texas, down US$2 from last week, they said.

 

Meat processors slaughtered an estimated 609,000 cattle this week, up from 602,000 cattle a week ago and 584,000 cattle a year earlier, according to US Department of Agriculture (USDA) data. They killed 2.47 million hogs, up slightly from last week and from 2.36 million a year ago.

 

In the pork market, the most-active April lean hogs contract went up 0.550 cent at 65.925 cents per pound and reached its highest since February 21.

 

Traders continue to hope for increased buying by China, as it grapples with an outbreak of a fatal pig disease that has decimated its herd.

 

Leading German meat processor Toennies reported increased sales, with the company benefiting from rising demand from Asia, especially China.

 

Estimated margins for US meat processors rose to US$116.25 per head for cattle from US$112.95 on Thursday and US$55.30 a week ago, according to livestock marketing advisory service HedgersEdge.com. Margins for pork packers increased to US$24.65 per head for hogs from US$23.25 on Thursday and US$20.90 last week.