Livestock Market Sees 10% Drop, 15% Recovery This Week

Key Points

  • Pork Demand Declines: Pork demand has been weaker than expected, adding to market negativity.
  • JBS Ractopamine Issue: Traces of ractopamine found in the JBS plant blocked U.S. beef exports to China.
  • Significant Drop in Live Cattle Prices: June live cattle contracts dropped by $1.20, with other months also seeing declines, indicating a pressing situation in the market.
  • Mixed Boxed Beef Prices: Choice cuts rose by $1.50, while Select cuts fell by $0.95, reflecting mixed market conditions.
  • Feeder Cattle Fall: Feeder cattle contracts dropped significantly after JBS news, nearing critical market indicators.

The livestock complex has been through a rough patch this week, facing significant pressure from various market factors. Pork demand needs to be more robust, failing to meet expectations and contributing to the overall negative sentiment. Additionally, China’s recent announcements have been less than encouraging, further dampening market spirits.

JBS Plant Finds Ractopamine: Beef Imports Blocked

Surprisingly, the JBS plant in Greely, Colorado, detected traces of ractopamine, a feed additive banned in China. This discovery led to the immediate blocking of beef shipments to China, a critical market for U.S. beef exporters. The ramifications of this issue were felt throughout the market, with live cattle and feeder cattle prices taking a hit.

Live Cattle: A Market Under Pressure

The live cattle market experienced a downbeat session, closing with significant losses. June contracts dropped by $1.20, settling at $183.35, while August and October contracts fell by $1.62 and $1.95, closing at $180.20 and $182.45, respectively. Despite these declines, the cash cattle trade remained undeveloped, with asking prices in the South ranging from $189 to $191. Market participants are hopeful that trade might pick up towards the end of the week.

Boxed Beef Prices Show Mixed Results

Boxed beef prices showed mixed results, with Choice cuts increasing by $1.50 to close at $313.62, while Select cuts decreased by $0.95, finishing at $302.48. The movement of 140 loads included a breakdown of 92.22 loads of Choice, 23.10 loads of Select, 7.31 loads of trim, and 17.79 loads of ground beef. These figures reflect the market’s attempt to balance supply and demand amid fluctuating conditions.

Feeder Cattle: A Dramatic Downturn

Feeder cattle experienced the most drastic reaction to the JBS ractopamine announcement, erasing gains made earlier in the week. August contracts plummeted by $4.35 to close at $260.25, while September and October contracts fell by $3.90 and $3.70, ending at $261.80 and $262.55, respectively. The market is now hovering around its 100-day moving average, a critical market sentiment indicator. Traders remain on edge, deciphering whether this trend signals optimism or pessimism moving forward.

Looking Ahead: Thursday Cattle Call

As we look ahead to the rest of the week, the Thursday cattle call expects prices to remain steady or rise by up to $2.00. Market leverage currently favours feedlot managers, given the extremely current show lists. Packers might adopt a wait-and-see approach, hoping for better prices before making significant moves.

The livestock market is navigating a complex web of challenges, from disappointing pork demand and blocked beef exports to fluctuating cattle prices. Market participants must stay agile and informed as they respond to these evolving conditions.

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