Chicago Mercantile Exchange (CME) live cattle futures saw a sharp retreat on Friday, dropping to a 2-1/2-week low after earlier gains.
The market’s dip was driven by long liquidation and profit-taking, as beef prices, which had surged in recent weeks, showed signs of peaking.
Traders attributed the slump to the cooling of the beef rally, paired with position squaring ahead of the U.S. Department of Agriculture’s (USDA) monthly Cattle on Feed report, released after market close.
The price of choice beef, which had been a key market driver, fell sharply on Friday, signaling a possible slowdown.
With the demand for beef typically dropping post-holiday season, the market seemed poised for a correction as we approach the U.S. Independence Day holiday.
CME August live cattle settled 1.850 cents lower at 209.825 cents per pound, marking the lowest close since June 3. According to Matthew Wiegand, a broker at FuturesOne, “The big run-up in choice box beef has slowed a bit today, and as we near July 4, it’s likely to cool off further.”
On Friday, the choice boxed beef cutout value dropped by $3.29 to $390.50 per cwt, following a $28.71 surge since June 6. Meanwhile, the select cutout rose $2.36 to $376.95 per cwt.
The USDA’s report after the close confirmed a 1% year-over-year decline in cattle on feed as of June 1, aligning with trade estimates. However, the 8% drop in May placements was a larger-than-expected reduction.
Meanwhile, CME feeder cattle followed live cattle lower, with early gains tied to the suspension of Mexican cattle imports amid concerns over the New World screwworm.
The USDA’s recent action to combat the pest in Mexico led to the drop, and August feeder cattle ended 1.725 cents lower at 302.450 cents per pound.
On a positive note, CME lean hog futures closed higher, with August contracts up 0.450 cent at 112.450 cents.
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