Chicago Mercantile Exchange (CME) live cattle futures galloped to a new high on Friday due to firm US cash prices, traders said, before the market backpedaled, reported Reuters.
Futures and cash prices have set records this year as cattle inventories have dwindled to their lowest levels in decades and meatpackers were increasingly forced to pay more to buy animals to process into beef.
But futures look too low compared to cash prices, which remained largely steady to slightly higher for most of the week after climbing last week, traders said. The strength in cash prices has prevented futures from falling hard when the market dips, they said.
"Every dip has been bought," said Matt Wiegand, commodity broker for FuturesOne. "Sellers are still pretty gun shy."
CME August live cattle futures reached a contract high of 224.55 cents per pound before ending down 0.125 cent at 223.55 cents per pound.
CME August feeder cattle futures slipped 1 cent to close at 324 cents per pound after setting highs last week.
With supplies already tight, the US Department of Agriculture (USDA) last week again halted imports of Mexican cattle due to the spread in Mexico of New World screwworm, a devastating livestock pest.
"This is such an unusual year, what with the Mexican border closure due to screwworm, short cattle supplies, and a strong stock market all coming together to keep funds actively buying livestock futures," said Dan Norcini, an independent trader.
A recent setback in beef prices has hurt meatpackers as cash cattle prices have stayed strong. Processors were losing an estimated $178.50 per head of cattle they slaughtered, compared to profits of $10.25 a week ago, HedgersEdge.com said.
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