March 31, 2020

 

US senators urge inquiries on surging profits for US beef processors

 

This comes after ranchers protested the surging prices for meat caused by COVID-19 did not convert to increased prices for cattle, reported Reuters.

 

The COVID-19 outbreak has dropped cattle futures prices, leaving farmers concerned as the US economy begins to fall and doubts if the CME Group run market is a helpful tool for risk management.

 

Iowa Senator Charles Grassley said on Twitter that probes should be conducted on US Department of Agriculture (USDA), Department of Justice and Commodity Futures Trading Commission to find out why ranchers are not able to benefit from the increased demand for meat.

 

Grassley said grocery shelves are being emptied but farmers prices aren't falling, adding that four meatpackers control 80% of the market.

 

HedgersEdge.com said margins for processors hit more than US$600 per head of cattle last week. However, four US senators (Montana, North Dakota and South Dakota) told the Department of Justice in letter to investigate price fixing that cattle producers are currently operating at a net loss.

 

Tyson said it has paid its cattle producers a premium last week. The company added that this is an unprecedented turn of events where retail demand for beef has gone up while food service demand has stopped.

 

Cargill said it is a big buyer for cattle in the cash market as it is less affected than futures.

 

The USDA said to ensure integrity and agricultural market transparency, it is working with the CFTC.

 

Over the last three weeks, the LCJ0 live cattle futures fell 3.5% on the Chicago Mercantile Exchange (CME) over concerns that COVID-19 will close slaughterhouses. Prices increased 20% for beef shipped to wholesale buyers from meat companies.

 

Cassie Fish, a beef expert and formerly from Tyson, said the futures market fell as managed funds liquidated long positions, or from increased bets prices. This was the highest decline in more than 45 years.

 

Meat processors and farmers use futures to offset meat production risks, with futures meant to replicate the cash market.

 

AgResource said last week, April cattle futures LCJ0 ended at US$18 to US$19 under the cash market, a new record.

 

The CME Group said it aims to boost its livestock markets.

 

-      Reuters