Live Cattle Shortage Becomes Deep-Seated Amid COVID Challenges

Chicago Mercantile Exchange, CME, live cattle futures further firmed during this Spring-welcoming week, with the front-month contract hitting its highest in more than 8 years as tight supplies continued to underpin the market.

CME March feeder cattle futures settled 0.625 cents higher at 189.8 cents per pound. The front-month contract hit its highest since November 2015 during the session.

April live cattle futures continue to hover around a short term trendline. In the resistance terms, 166.10-166.50 looks like a support line that should reconfirm previous seller/buyer parity, leading the high protein commodity to new historic highs.

CME April lean hogs are also trending higher, in this case by 0.45 cent at 85.175 cents per pound, slightly below its intraday peak after hitting resistance at its 30-day moving average. June hogs, however, dropped 0.375 cent to 101.725 cents.

The USDA cattle inventory report from early this month confirmed the fact that the deficit in the Western Hemisphere is building slowly but surely. Beef cow numbers have hit their lowest number in 6 decades at less than 29 million heads, down 4% in the last year alone. Slaughter numbers of finished cattle and cows will be shrinking in 2023 and beyond. (See "CattleFax Forecasts for 2023 Prices" below.) READ MORE: U.S. beef cow herd falls to lowest level since 1962, USDA says.

After the Covid anti-restaurant shift of paradigm, much of that strong demand for beef is for high-quality, eat-at-home beef. This might be the silver lining to the Covid-19 pandemic. Because of restaurant closings, beef packers had to divert some of their highest quality product to grocery stores for direct sales to consumers.

In contrast, Beef consumption last year was the highest in 12 years, at 58 pounds per person, and the retail price was record high at $7.30 per pound. That’s surging demand. 5. Also on the demand side, beef exports are chugging along at a high rate.

CattleFax Forecasts for 2023 Prices Fed cattle looks somewhat conservative: $150 to $172 per hundredweight trading range, with an average of $158 for the year, up $14 from last year. Peaks will come in early summer (because of the grilling season) and late in the year. 550-pound calves: $200 to $250 price range for the year, with an average of $225, a bump of $29 per hundredweight over last year.

Summary

Due to a forming deficit exacerbated by non-stoppable demand growth, as well as a very long period of inventory replacement, live cattle is expected to pierce the 200 cents per pound when the grilling season begins, over 60 cents above last year.