CME Cattle Futures Decline After Recent Price Surge

Chicago Mercantile Exchange (CME) live cattle and feeder futures experienced a decline on July 14, 2023, following a significant rally in the previous week. Traders indicated that this pullback was a technical correction after prices reached elevated levels. The market had surged as cash prices unexpectedly jumped and the U.S. government suspended imports of cattle from Mexico, thereby constraining supply.

In recent weeks, consumer demand for beef has remained robust. This demand comes in tandem with a tight cattle inventory in the United States, which has led to reduced production and record-high prices. The futures market took a moment to recalibrate after a notable rise on July 11, when live cattle futures surged by 3.8% in just one week.

CME August live cattle futures closed down by 2.85 cents, settling at 219.35 cents per pound. Meanwhile, August feeder cattle futures fell 5.85 cents to finish at 319.475 cents per pound. This decline followed a week where feeder cattle prices had surged by 5%, reflecting an increase in cash prices ranging from $4 to $8 per hundredweight.

The situation intensified when the U.S. Department of Agriculture announced on July 12 that it would halt cattle imports from Mexico due to the emergence of the New World screwworm, a serious livestock pest. This decision came shortly after the USDA had begun to resume imports. Typically, U.S. producers import cattle from Mexico to fatten in American feedlots before processing.

Amidst rising cattle prices, meatpackers faced negative profit margins as they struggled to cover the higher costs. According to data from HedgersEdge.com, processors reported a loss of $43.20 for each head of cattle processed on July 14, a stark contrast to the $73.95 profit reported just a week earlier.

Wholesale boxed beef prices also reflected downward pressure, with choice cuts decreasing by $1.57 to $377.07 per hundredweight, according to USDA data. In contrast, the wholesale U.S. carcass cutout price for pork showed a slight increase of $0.38, reaching $113.85 per hundredweight. Despite this, CME August lean hogs ended the day down 1.45 cents, closing at 103.225 cents per pound.

On the supply side, meatpackers estimated that approximately 477,000 hogs were slaughtered, down slightly from 478,000 the previous week and 474,933 a year ago. In cattle processing, an estimated 112,000 heads were slaughtered, compared to 114,000 the week prior and 117,427 a year ago, reflecting ongoing inventory challenges.

As the market adjusts to these developments, stakeholders will continue to monitor both demand and supply dynamics closely, particularly in light of the recent policy changes affecting cattle imports.