U.S. cattle futures surged to fresh peaks Tuesday, lifted by record high prices paid for cattle in cash trade across the country and a sharp jump in wholesale beef values over the past week.
February live cattle picked up 1.2 cents, or 0.9%, to $1.4155 a pound at the Chicago Mercantile Exchange, the highest closing price ever for a front-month contract, following a 2.7% gain over the past week. April cattle advanced 0.92 cent to $1.4022 a pound.
The cattle market has been underpinned by strong demand by U.S. beef processors for slaughter-ready cattle, which remain in snug supply after years of drought and industry consolidation. Wholesale prices of beef, meanwhile, continue to make consecutive new record highs for most-common choice and select grades of beef.
Beef processors have more incentive to bid aggressively for cattle in the negotiated markets if retailers are willing to pay up for wholesale beef. This contributed to the record-breaking cash cattle prices last week, with most owners garnering between $1.42 and $1.44 1/2 a pound live for their slaughter-ready animals.
Cash prices are now significantly higher than the front-month futures contract, which has further fueled buying in the cattle futures market.
Some market watchers are uncertain how long cattle and beef prices can remain at these record-high levels, if retailers find themselves unable to pass on the increase in meat costs. "We're all keeping a very skeptical view of things right now, because it won't really be until February until consumers see these higher prices," said Rich Nelson, chief strategist with Allendale Inc. in McHenry, Ill. "But in the short term, we remain in this fantasy land of prices."
Wholesale choice-grade beef prices climbed $3.01 per hundred pounds to $239.57 at midday Tuesday, according to the U.S. Department of Agriculture, breaking the new records set in consecutive days last week. Select-grade prices climbed $2.57 per hundred pounds to $237.02, also an all-time high. Beef prices have risen over $15 per hundredweight in the past week.
Most-active feeder-cattle futures for March added 0.4 cent, or 0.2%, to $1.6832 a pound. The January contract declined.
Hog futures ended mixed, lifted in some contracts by buying across the livestock complex. February hogs shed 0.2 cent, or 0.2%, to 85.97 cents a pound. That contract was pressured by the nearly six-cent premium of the front-month futures to recent cash market prices.
April hogs, meanwhile, ended 0.47 cent higher on the day at 92.37 cents a pound.
