US cattle decline slowing?

By Joanna Levin

THE disastrous collapse in the US cattle market appears to have shown signs of slowing, but prices remain sharply down on the start of the year.

After hitting astounding lows at the start of the week, both feeder and live cattle prices climbed yesterday (Tuesday).

The September feeder cattle contract settled at 67.55¢/lb, up 1.50¢ from Monday when the market touched 65.5¢/lb. Contracts are still down sharply from just under 70¢/lb at the start of last week and 82¢ at the start of the year.

The August live cattle futures contract also gained 1.5¢ yesterday to 59.82¢/lb, having dipped to 58¢ at the start of the week. The contract still has a long way to go to recover to the 61.25¢ level at the start of last week or the 70¢/lb seen in May.

At todays prices, US ranchers and feedlots operators are bleeding badly. The recent rebound is attributed to cheaper feed maize as well as a perception that live cattle returns could rally further if farmers refuse to sell at such low prices.

Packers have been enjoying unusually healthy margins in recent days and producers argue that the slaughter houses can afford to pay substantially higher prices for fat cattle. By pushing up the sales price to the packers, producers have succeeded in firming up the entire beef complex.

Packers bids have climbed from 58 to 59¢/lb already this week, while sellers were offering 61-62¢/lb. Some analysts estimate that the slaughterhouses could afford to pay 63¢/lb comfortably for live cattle and still leave room for profit.

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