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Supply Chain

CME Cattle Futures Drop As Fire Closes JBS USA Beef Plant

Chicago Mercantile Exchange cattle futures fell to their lowest prices since June on Monday on concerns that US ranchers could temporarily lose a place to deliver their livestock for slaughter after a fire damaged a JBS USA beef plant.

JBS, owned by Brazilian firm JBS SA, halted production at the plant in Grand Island, Nebraska, which slaughters about 5% of US cattle. The company later said it expects to resume operations on Tuesday.

Uncertainty about when the plant will reopen rattled cattle futures because the industry does not have extra capacity to process livestock at other plants, analysts said. That means cattle could back up in feedlots and on ranches if a major plant closes for an extended period of time.

"When you lose that packing capacity, there's going to be more cattle than capacity to go around," said Matt Wiegand, a risk management consultant and commodity broker at FuturesOne in Nebraska. "Then you're going to get cheaper cattle."

CME December live cattle tumbled 1.075 cent to 127.150 cents per pound and reached their lowest price since 1 June. October feeder cattle slid 2.275 cents to 155.450 cents per pound, touching its lowest since 11 June.

Boxed Beef Prices

Boxed beef prices eased even though production dipped due to the plant fire. Choice cuts of boxed beef fell $1.29 to $325.93 per cwt, while select cuts dropped $1.21 to $292.16 per cwt, the US Department of Agriculture said.

The JBS plant has the capacity to slaughter 6,000 cattle a day, according to industry estimates. Meatpackers typically slaughter about 120,000 cattle per day nationwide.

On Monday, meat companies processed 114,000 cattle and 471,000 hogs, according to the USDA.

In the pork market, hog futures extended a recent slump. Most-active CME October lean hog futures declined 1.675 cents to 80.775 cents per pound and hit its lowest price since 22 March.

In August, JBS SA said it had the best quarter in its history, according to an earning statement, posting net income that rose almost 30% to 4.382 billion reais (€720 million).

News by Reuters, edited by ESM. For more Supply Chain news, click here. Click subscribe to sign up to ESM: European Supermarket Magazine.

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