Setbacks in US beef exports to China dampen August live cattle futures

Trey Freeman, Commodity Futures Broker/Livestock Agent, Ever.Ag

After advancing nearly $10 per hundredweight over the course of 10 days, August live cattle futures stalled last week, drifting lower since. The loss of upward momentum is the result of two negative headlines affecting US beef exports to China.

First was the detection of ractopamine (a feed additive used to boost animal weights) in beef destined for China. The product originated from a JBS plant in Greeley, Colorado. Beijing was quick to block beef exports from the plant upon the positive test, as ractopamine is banned in China and more than 160 other countries.

Additional pressure was brought on by China’s decision to lift export bans on five major Australian beef processing plants. China has been a large importer of US beef since 2020, when trade relationships soured between Beijing and Australia following Australia’s call for an independent investigation into the origins of COVID-19.

For perspective, China has been the destination for at least 15% of total US beef exports in each of the prior three years, behind only Japan and South Korea.

On the domestic front, demand holds strong, with choice beef cutout at $314.28 per hundredweight. Cutout prices are anticipated to begin their seasonal decline next week as the dog days of summer approach, curbing grilling demand.

Dressed weights for fed cattle continue their counter-seasonal rise, trending higher since early February. Dressed weights for steers are 36 pounds higher than a year ago, and heifers are 29 pounds higher. Seasonally, weights tend to bottom in June and increase into November.

Cash trade has not developed this week, as of this writing. Cash prices were $1-$2 per hundredweight lower last week compared to the previous week, trading at $186 live in the South and $190 in the North. Cattle feeders may have been encouraged to move cattle at lower prices on account of a continued strong basis, whereas June live cattle futures are currently trading $181.775 per hundredweight, well under last week’s 5-Area Fed Cattle price of $188.91.

The risk of loss trading commodity futures and options can be substantial. Investors should carefully consider the inherent risks in light of their financial condition. The information contained herein has been obtained from sources deemed to be reliable, however, no independent verification has been made. The information contained herein is strictly the opinion of its author and not necessarily of Ever.Ag and is intended to be a solicitation. Past performance is not indicative of future results.