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The external factor that is squeezing the price of live cattle higher is the action being taken by Tyson Foods, the largest US meat processor. It has taken the decision not to accept cattle that have been fed the supplement Zilmax. This substance tends to be given to cattle in the final couple of weeks before slaughter and helps them gain additional weight. There have only been a few instances where cattle fed with Zilmax have looked less than healthy, but that has been enough for Tyson to suspend its use until further testing and clarification can be gained.
At the moment it is only Tyson Foods which has taken this decision, but as it is the market leader it is possible that other suppliers will follow. Judging by the price action it is obvious that some traders have already factored in this increased tightening of the supply chain, and hence we find ourselves well-supported at three-month highs.
At present this situation is only affecting the US market, but as the country is the largest consumer we could well see ramifications in other regions as a consequence.