Cattle Rally into Thursday’s Close

Live cattle futures rose between $1.45 and $2.15 across front months on Thursday, supported by cash trade reports of $230-231 live in the north. Feeder cattle futures saw gains of $3.25 to $3.60, while the CME Feeder Cattle Index increased to $295.69 on May 21. Beef export sales totaled 12,276 MT, with Japan and South Korea as top buyers; choice boxed beef prices also increased, reaching $360.97 per hundred pounds.

Analysis

Live cattle futures demonstrated notable strength, with front-month contracts posting gains ranging from $1.45 to $2.15 on Thursday; for instance, June 25 delivery settled at $215.625 and August 25 at $210.500. This price appreciation was underpinned by cash market activity, where live cattle traded at $230-231 in northern regions and dressed sales were reported at $360-370. Feeder cattle futures also saw significant increases, with most contracts advancing $3.25 to $3.60, although the nearby May contract experienced a decline of $0.900 upon expiration, closing at $295.400. The CME Feeder Cattle Index, however, reflected underlying support, rising 31 cents to $295.69 as of May 21. In terms of international trade, beef export sales for the week ending May 15 totaled 12,276 metric tons, marking a decrease from the prior week, with Japan (3,600 MT) and South Korea (2,800 MT) as the leading buyers. Conversely, actual shipments rose to 14,828 MT. Wholesale boxed beef prices continued their upward trajectory, with Choice boxes increasing by $1.38 to $360.97 and Select boxes by $0.67 to $348.95, maintaining a Choice/Select spread of $12.02. The federally inspected cattle slaughter for the week reached 471,000 head, up 12,000 head from the previous week but down 8,832 head compared to the same week last year, indicating a potential tightening of market-ready cattle supply year-over-year.

Key Decisions for Investors

• Investors should closely monitor upcoming beef export sales figures, as the recent weekly decline, despite increased shipments, could signal shifts in international demand patterns.
• The year-over-year decrease in federally inspected cattle slaughter, notwithstanding a weekly increase, warrants attention as it may indicate tightening supply fundamentals that could provide continued support for cattle prices.
• Given the prevailing strength in live cattle futures and wholesale boxed beef prices, which are generally bullish indicators, investors might consider maintaining or initiating long positions, while remaining vigilant about feeder cattle contract dynamics and export demand fluctuations.