Chicago Mercantile Exchange Live Cattle Futures Witness Sizable Rally Amid Technical Strength and Boxed Beef Movement

Strategic Insights -

Despite concerns about feeder values being too expensive compared to feedgrain costs and deferred live cattle futures price levels, Chicago Mercantile Exchange live cattle futures continue to experience technical chart strength and significant boxed beef movement, propelling the market to new highs in most contracts. The deferred live cattle contracts and soaring feeder futures are driving market strength, with many traders and analysts observing substantial losses among short positions and bearish traders anticipating a faltering in wholesale beef quotes. Meanwhile, the U.S. Department of Agriculture has allocated $18.8 million to establish a national livestock identification system, aiming to track over 100 million animals through massive databases.

Key Takeaways:

  • Live cattle futures traded higher, driven by technical chart strength and significant boxed beef movement.
  • Deferred live cattle contracts and soaring feeder futures are the primary drivers of market strength.
  • Feeders lost contracts as profit takers appeared at new highs in May and Aug, with some analysts considering feeder values too expensive compared to feedgrain costs and deferred live cattle futures price levels.
  • Short positions in live cattle are expected to face significant losses due to the rise in prices.
  • The CME feeder index posted sharp gains ahead of Apr's expiration, but feeder futures contracts, except Apr, continued to trade at prices discount to the current CME feeder index.
  • The U.S. Department of Agriculture announced a new national livestock identification system with an allocated budget of $18.8 million.
  • Cattle packers' operating margin index for Tuesday was $33.45 per head, indicating a positive trend in the industry.
  • The estimated cattle slaughter on Tuesday was 128,000 head, down from 130,000 last week and 133,000 last year.

Statistics:

  • $18.8 million allocated by the U.S. Department of Agriculture for its new national livestock identification system.
  • 100 million animals expected to be tracked through the massive databases of the national livestock identification system.
  • $157.25: Light choice boxed beef price on Tuesday, down $0.71 from the previous price.
  • $95.53: CME feeder index, $0.55 higher than the previous day.
  • $20.03: Choice/select spread for Tuesday.
  • 128,000 head: Estimated cattle slaughter on Tuesday.
  • 130,000 head: Estimated cattle slaughter last week.
  • 133,000 head: Estimated cattle slaughter last year.

Sources:

  • Chicago Mercantile Exchange (CME) via OsterDowJones.
  • OsterDowJones, Jim Cote, (312) 715-6284, jcote@osterdowjones.com.
  • COMTEX (http://www.comtexnews.com).
  • U.S. Department of Agriculture (USDA).