Feeder Cash Market Leads Live Cattle Futures

Trey Freeman, Commodity Futures Broker/Livestock Agent, Ever.Ag

The fed cattle cash market continues to lead live cattle futures, with the most active August contract selling at a steep $10 per hundredweight discount to last week’s 5-zone average price of 192.55 dollars. June futures, set to expire next Friday, also remain at a discount, currently $6 per hundredweight below Zone 5.

The continued lack of enthusiasm in live cattle futures can be attributed to the stronger-than-expected beef production seen through 2024. Markets may also be concerned about softer-than-normal beef demand for the period from July 4 to Labor Day weekend, amid rising retail prices.

Beef production is down just 1.5% year-to-date versus 2023, largely due to high headweights of dressed cattle. Last week, dressed weights for drivers were reported at 924 pounds, four pounds higher than last week and 37 pounds more than last year. Cheap feed prices have allowed cattle feeders to feed longer and capture better margins. Friday’s Cattle on Feed report is expected to show a record number of total cattle on feed of 120 days or more.

Last week, the USDA reported the average May price for whole fresh beef at retail at $7.96 per pound, up from $7.50 a year earlier. Average retail prices have risen month-over-month in 15 of the past 18 months.

The choice beef cut averaged $318.29 per hundredweight last week, compared to the all-time price for the same week last year of $339.93.

Feeder futures have traded in a range of $16 per hundredweight over the past 60 days. Analysts are closely monitoring corn futures as market weather plays a large role in moving corn and soybean prices this time of year. The June Acreage report, set to be released next Friday, could be the catalyst to push nutrient futures out of limited trading. Early pre-report estimates for corn acres range between 87 and 93 million acres.

Preview estimates for Friday’s Cattle on Feed report:

In supply as of June 1: 99%, with a range of 98.3% to 100%

Set in May: 98.5%, with a range of 95% to 102.4%

Traded in May: 100.5%, with a range of 99.3% to 102.3%

The risk of loss trading commodity futures and options can be substantial. Investors should carefully consider the inherent risks in light of their financial condition. The information contained herein has been obtained from sources believed to be reliable, however, no independent verification has been made. The information contained herein is strictly the opinion of its author and not necessarily that of Ever.Ag and is intended to be a solicitation. Past performance is not indicative of future results.