Key Takeaways
- Live and feeder cattle futures experienced expanded limit down trading on Tuesday, following similar conditions on Monday, indicating significant selling pressure.
- Long liquidation was a prominent theme, driven by external factors including trade tariff news concerning Argentina and Mexico, as well as comments from President Trump regarding beef prices.
- Cash cattle trade saw declines, with prices falling significantly in Nebraska, and feeder cattle auctions also reporting lower figures.
- USDA wholesale boxed beef prices edged higher, while inspected cattle slaughter numbers were up from the previous week but down year-over-year.
Cattle Futures Face Significant Sell-off
Live cattle futures experienced another day of expanded trading limits on Tuesday, a situation mirrored by feeder cattle as well. This indicates a strong desire among speculative traders to exit long positions, with limited available avenues for doing so. While live cattle futures managed to rebound from their lower limits towards the close of trading, they still concluded with substantial losses ranging from $4.97 to $9.82 across various contracts.
Long liquidation was particularly evident in the front-month contracts, contributing to a notable drop of 8,219 contracts in open interest. The cash trade for cattle began earlier in the week, with prices in Nebraska falling between $5 and $9, settling around $230 on Monday.
Feeder Cattle Markets Under Pressure
Feeder cattle futures also saw considerable declines. The October contract lost $8.80, while other contracts traded down to the expanded limit of $13.75. Despite the futures market pressure, the CME Feeder Cattle Index saw a slight increase of 47 cents, reaching $367.55 on October 24.
In the weekly auction at Oklahoma City, 3,555 head of feeder cattle were offered. Price action reflected the broader market sentiment, with prices for feeder cattle down $30-$40, and calves experiencing even steeper declines of $40-$50.
External Factors Influencing the Market
The ongoing long liquidation in the cattle markets appears to be influenced by a confluence of external factors. Recent news regarding President Trump’s announcement to raise Argentina’s tariff rate quota, coupled with reports of the Mexican agricultural minister heading to discussions about border issues, have contributed to market uncertainty.
Additionally, a reported easing of trade tensions between the U.S. and Brazil may have also played a role. Early Tuesday morning, the U.S. President made further comments suggesting a need to reduce beef prices, implying that ranchers might be experiencing excessive profitability.
USDA Data and Market Performance
The USDA’s latest Wholesale Boxed Beef report for Monday afternoon indicated higher prices. The spread between Choice and Select boxed beef stood at $16.22. Choice boxes saw an increase of $2.12, closing at $377.88, while Select boxes were up $3.69, trading at $361.66.
Inspected cattle slaughter figures for Monday, reported by the USDA, reached 105,000 head. This represents an increase of 13,000 head compared to the previous week but falls short by 15,390 head when compared to the same week last year.
Key Contract Performance
- Optimizing investment strategies requires understanding market movements. For instance, the <a href=https://www.barchart.com/futures/quotes/le1/overview rel=nofollow noopener noreferrer target=_blank>October 25 Live Cattle contract closed at $228.825, down $4.925.
- The <a href=https://www.barchart.com/futures/quotes/le2/overview rel=nofollow noopener noreferrer target=_blank>December 25 Live Cattle futures settled at $227.175, marking a decrease of $6.750.
- Further out, the <a href=https://www.barchart.com/futures/quotes/le3/overview rel=nofollow noopener noreferrer target=_blank>February 26 Live Cattle contract finished at $224.000, reflecting a loss of $9.425.
- In the feeder cattle arena, the <a href=https://www.barchart.com/futures/quotes/gf1/overview rel=nofollow noopener noreferrer target=_blank>October 25 Feeder Cattle futures closed at $345.500, down $8.800.
- The <a href=https://www.barchart.com/futures/quotes/gf2/overview rel=nofollow noopener noreferrer target=_blank>November 25 Feeder Cattle contract experienced a significant drop, closing at $338.450, down $13.750.
- Similarly, the <a href=https://www.barchart.com/futures/quotes/gf3/overview rel=nofollow noopener noreferrer target=_blank>January 26 Feeder Cattle contract also hit the expanded limit, settling at $334.425, down $13.750.
Final Thoughts
The cattle markets, both live and feeder, have been subject to substantial selling pressure, exacerbated by external trade concerns and policy discussions. While short-term price movements indicate weakness, ongoing developments in trade relations and government commentary will be crucial for future market direction.
Investors and market participants will be closely monitoring cash trade, slaughter levels, and any further pronouncements that could impact supply and demand dynamics in the cattle sector.