Cattle Rallies to Start New Month

Live cattle and feeder cattle futures rallied on Monday, with live cattle contracts rising between $1.07 and $1.80 and feeder cattle contracts increasing $2.92 to $3.50. Cash trade remains limited this week, while the CME Feeder Cattle Index increased by $1.83 to $301.13 on May 30. Wholesale boxed beef prices were mixed, with Choice boxes down $0.34 and Select boxes up $1.46, and Monday's federally inspected cattle slaughter was 115,000 head, down 2,863 from last year's post-holiday week.

Analysis

Live cattle futures experienced a notable rally on Monday, with contracts posting gains ranging from $1.07 to $1.80. This upward momentum was mirrored in the feeder cattle futures market, where contracts surged between $2.92 and $3.50. Cash cattle trade has been subdued early in the week, referencing last week's prices of $221-223 in the South, with some instances up to $225, and $234-237 in the North. Reinforcing the strength in the feeder market, the CME Feeder Cattle Index rose by $1.83 on May 30 to $301.13. Further evidence of robust demand for feeder cattle came from the Monday OKC auction, which saw an estimated 7,500 head for sale, with steer prices $5 to $12 higher and heifer prices steady to $4 higher. However, the wholesale boxed beef market presented a mixed picture: Choice boxes declined by 34 cents to $366.00, while Select boxes increased by $1.46 to $358.11 per cwt, narrowing the Choice/Select spread to $7.89. Monday's federally inspected cattle slaughter was 115,000 head, a decrease of 2,863 head compared to the equivalent post-holiday week last year, potentially indicating tighter near-term supplies. The overall sentiment, as indicated by signals, is strongly positive with a bullish tone.

Key Decisions for Investors

• Given the strong rally in both live and feeder cattle futures and positive feeder cattle auction results, investors might consider maintaining or initiating long positions in cattle futures, anticipating continued short-term price strength.
• Monitor the development of cash cattle trade closely, as its limited activity so far this week needs to pick up to confirm the futures market's bullish sentiment and sustain the rally.
• Investors should note the mixed signals from wholesale boxed beef prices and the lower year-over-year slaughter numbers, as these factors will be crucial in determining the longer-term price trajectory and potential supply constraints.