Chicago Mercantile Exchange (CME) cattle futures continued to rally on Tuesday, gaining support from a slump in oil prices, relatively high cash cattle prices and general strength in the US equity markets, Reuters reported, citing analysts.
The Nasdaq Composite and the S&P 500 finished lower on Tuesday under pressure from technology stocks, but the Dow Jones Industrial Average marked its second straight record close and SpaceX rallied to become the fifth-most valuable US company.
Strength on Wall Street tends to support optimism about consumer demand for pricey cuts of beef, while falling oil prices have some fund traders predicting demand for higher-priced steaks could boom during the US grilling season.
"The thinking has been that the higher the price of gas, the more that cuts into consumer demand for beef. And the lower the price of filling your tank, the more cash people have to spend" at the meat counter, said Dan Norcini, an independent livestock analyst.
Oil prices fell about 5% for a second day in a row to a three-month low on Tuesday as details emerged of an interim deal to end the war in the Middle East and reopen the Strait of Hormuz, including an agreement to allow Iran to sell oil.
The deal would extend a tenuous ceasefire announced in April by another 60 days and reopen the Strait of Hormuz, which Iran has effectively blocked since the US and Israel first attacked Iran.
Still, Norcini said, consumer demand for beef has stayed strong throughout the US-Iran war. "I think what we're seeing in the markets right now is more of a psychological trade than anything else."
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