The highest cattle futures on record is being underpinned by drought conditions in South-western US, which has devastated feed availability for stock.
As a result of dry conditions, the US cattle herd has dropped to its smallest size in eight years. The hardest hit areas are Texas, Oklahoma, Kansas and Nebraska, where ranchers have been culling females for the last 18 months, according to Walter Kunisch, a senior commodities strategist at HTS Commodities.
The situation is unlikely to change quickly which is one of the reasons pushing future prices higher as the market expects beef shortages to stay for some time.
USDA figures show that on January 1 this year, there were 89.3m head of cattle in the US, which is back 3% in the year. This is the smallest national herd since 2015, with the supply of cattle to abattoirs dropping by 5%, according to industry reports. As a result, store and finished animals are changing hands for record amounts.
The Chicago Mercantile Exchange recorded futures price of 243.25c per pound (the equivalent of around £4.20 per kg) for August feeder cattle, or store animals. This is the highest price recorded since data started being collected in 1971 and is a massive 33% rise on the year.
August's futures for live finished cattle settled this week at an all-time high of 175.5c per pound, or more than £3 per kg live – based on data as far back as November, 1964, with prices up roughly 11% year to date.
Lance Zimmerman, the Rabobank's senior beef analyst, said the tight supplies and 'continued exceptionally strong demand for beef,' had caught the futures market by surprise.
READ MORE: Shortage of beef cattle is fuelling finished prices to record levels
Meanwhile, the spot market for finished cattle also hit an all-time highs of $1.82 per pound. Whilst retail prices have dropped from the record high during covid of $7.55/lb by around 22 cents. But market experts all believe the price of beef on US shelves is likely to rise in the coming months. Experts have calculated that on average, U.S. consumers have to work about 15 minutes to provide a serving of beef for each member of their family. Mr Zimmerman said: “Consumers still view beef as an expense that is worth the higher prices and it is still generally cheap. There is more higher quality beef…on the market than at any point in history and the juiciness, tenderness and flavour of beef cannot be replicated by any other protein item.
Even if rains arrive in time to improve grass growth supply wont turn around quick as many breeders will retaining females to restock recent losses to their herds. Elsewhere supplies of corn, a key feed input for cattle in states such as Texas, Kansas and Nebraska, are tight as costs of inputs remain high.
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