Why Severe Droughts Could Actually Make Your Hamburgers Cheaper This Summer

When this seemingly never-ending winter finally gives way to warmer weather, here’s one more thing to look forward to: beef is likely to be cheaper for summer grilling.

Cattle futures have been sliding as market watchers expect a landslide of meat in the coming months. Severe drought is parching the U.S. Plains, and ranchers have had no choice but to send their animals to yards where they’re fattened up for market with grains. That speeds up the growing process and means the animals will go to market earlier than usual.

“It’s a shockingly weak market,” said Dennis Smith, a senior account executive at Archer Financial Services Inc. in Chicago. Traders can expect “a bulge in production that’s going to happen in the second and third quarter,” he said.

Extreme and exceptional drought has spread across Texas, Oklahoma, Kansas and Colorado, according to the U.S. Drought Monitor in Lincoln, Nebraska. It’s been that way for around six months, and doesn’t show signs of improving.

Amid the dryness, farmers placed 1.82 million cattle in feedlots in February, up 7.3 percent from the prior year, according to a U.S. Department of Agriculture report released March 23. Placements in previous months were also higher, including a notable 14 percent jump in November.

Cattle futures for June delivery on the Chicago Mercantile Exchange have dropped about 7 percent this year and reached a one-year low of 97.075 cents a pound on April 4.

Heated rhetoric around the brewing trade fight between the U.S. and China has also pushed down futures recently, even though the Asian country is not a destination for much American beef, Smith said.

Fund Bets

Hedge funds are signaling there’s little hope for a rebound.

In the week ended April 9, speculators cut their cattle net-long position by 26 percent to 27,255 futures and options, according to U.S. Commodity Futures Trading …read more

Source:: Time – Science


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