On Thursday, the nearby live cattle contract had its highest close since March 5 before all the lockdowns. For weeks, the contract was hovering just below the $100 mark, slightly surpassing it a few times before dipping lower. However, the last two sessions have broken through that resistance.
According to Karl Setzer of AgriVisor, there’s been an increase of consumer demand on all fronts.
“Consumers are getting out, they’re going to restaurants, they’re buying food to take home—not necessarily dining in the restaurant, but they’re still more demand because people want to get out,” he said. “We’re seeing a lot more grilling demand, and typically in the summer when people grill, it’s beef.”
Even though lockdowns in many places are loosening up and people have the ability to eat in restaurants, many consumers are choosing not to in order to avoid large crowds. Setzer says this has been a benefit to beef demand.
“Argentina said they’re going to halt their beef exports out of some of their packers because COVID is running in and they’re having all kinds of issues,” he said. “That could end up giving the United States more beef demand in the global market. Definitely a plus for us and finally push futures above that $100-mark.”
The hog market is facing a similar story—also seeing some strong gains in the last few days. The futures contract has been hovering near the $50 Export sales were up 22 percent compared to the previous four-week average. Setzer said there’s still a big need for pork in China, but there’s an oversupply issue.
“Even before COVID, we had too many hogs waiting to get into backing houses, and that put it backwards,” he said. “Now there’s an estimated 2 million hogs sitting in front of these packers that need to get processed. Until we get our expansion under control and get our production under control, the industry is going to suffer.”
Setzer talks about China’s record purchase of corn and Thursday’s market action in the full conversation in the player above.