Cattle Mostly Higher at Thursday’s Midday

Live cattle and feeder cattle futures posted gains up to $0.55 and $1.17 respectively on Thursday, reflecting a market with varied underlying dynamics. While weekly beef export sales for 2025 shipment were strong at 14,075 MT, current exports reached a three-week low. USDA data further showed May beef stocks decreased 2.73% month-over-month, with wholesale boxed beef prices mixed and the Choice/Select spread narrowing, suggesting a complex supply-demand picture despite the day's futures strength.

Analysis

Live cattle and feeder cattle futures are exhibiting strength, with front-month feeder cattle gaining up to $1.17, supported by fundamentally bullish supply-side data. The USDA reported that May-end beef stocks declined 2.73% from the prior month and 1.18% year-over-year to 407.786 million lbs, indicating tightening inventories. This is complemented by a federally inspected cattle slaughter rate that, while up from the prior week, remains 5,691 head below the same week last year. Forward-looking demand appears robust, with weekly export sales for 2025 shipment totaling 14,075 MT. However, several counter-signals suggest caution. The physical market shows signs of resistance, as evidenced by a lack of sales in the Fed Cattle Exchange auction despite bids reaching $224, and cash trade has not yet established a firm trend for the week. Furthermore, current export shipments have dropped to a 3-week low of 12,597 MT, and the wholesale boxed beef market is mixed. A notable decline of $0.57 in Choice boxes alongside a $2.27 increase in Select boxes has narrowed the Choice/Select spread to $15.81, potentially signaling a shift in consumer demand towards lower-cost cuts.

Key Decisions for Investors

• Investors should view the rally in futures with cautious optimism, as it is primarily driven by tightening supply fundamentals and strong forward sales, but lacks confirmation from the current cash and physical export markets.
• Monitor the narrowing Choice/Select spread closely, as its continued compression could indicate weakening consumer demand for premium beef, potentially capping upside for Choice-grade cattle prices.
• The failure of the cash auction to transact despite firm bids suggests a price standoff; a key consideration is whether the cash market will follow futures higher, as a continued disconnect could signal that the futures rally is overextended.