Market watchers are looking for signs of lower demand for U.S. burgers and steaks during some of the hottest weeks of the year. Getty Images
CHICAGO—U.S. cattle prices are sliding from the record highs reached last month as investors bet beef consumption could cool in the short term.
Live cattle for August delivery fell 3% last week to $1.5255 a pound on the Chicago Mercantile Exchange, the lowest closing price for a front-month contract since July 18. Futures for feeder cattle, animals that are being fattened for slaughter, lost 2.2% last week to $2.15325 a pound.
Persistent drought in the central U.S. has curbed cattle supplies, causing prices to surge to the highest level in history. Now, during the hottest time of the year, when red-meat consumption typically slips, market watchers are looking for signs of lower demand for burgers and steaks.
"Livestock markets have run up all summer long, and now traders are wondering how much of that reflected supply fundamentals and how much of it was just exuberance" as bullish bets continued to mount, said Altin Kalo, an economist with food-industry advisory firm Steiner Consulting Group in Manchester, N.H.
Money managers increased their bets on higher prices by 3.4% in the week ended Aug. 5 to a three-week high, according to the Commodity Futures Trading Commission.
Fundamentally, the market is facing its smallest herd since 1951. While extremely dry conditions in major cattle-raising states like Texas have moderated this year, some ranchers are retaining breeding animals to expand their herds, instead of selling them for slaughter.
In addition, beef is facing competition from pork and poultry, as the cheapest feed-grain costs in years are likely to result in more and heavier animals. If pork and poultry supplies grow, prices for those proteins in stores could further undercut beef.
Supplies of pork and poultry also could get a boost from international sanctions. On Thursday, Russia's prime minister said the nation would curb imports of U.S. beef, pork, poultry and other food items.
"If you see exports of poultry and pork back up in the U.S., that pressure on prices from the increased supplies could trickle across the meat case," said Don Roose, president of brokerage U.S. Commodities in West Des Moines, Iowa.
Wholesale prices for choice-grade beef reached an all-time high of $2.6366 a pound on July 31, compared with $1.2786 a pound for pork and $1.1275 a pound for the benchmark wholesale chicken price, according to U.S. Department of Agriculture data.
Beef prices fell to $2.6045 a pound Friday but are still more than double the price of chicken or pork.