Cattle Falling on Tuesday

Live cattle futures are down $3 to $4.55 in midday trading, while feeder cattle futures are declining by $4.90 to $5.35, erasing Monday's gains; the CME Feeder Cattle Index fell $3.21 on June 13th. Wholesale boxed beef prices are rising, with Choice boxes up $3.07 to $385.18/cwt and Select boxes up $2.79 to $370.26/cwt, although Monday's federally inspected cattle slaughter was estimated at 103,000 head, lower than both the previous week and the same week last year.

Analysis

Live cattle futures are experiencing a significant downturn, with prices falling between $3.00 and $4.55 at midday; for instance, August futures dropped by $4.55 to $211.000. Similarly, feeder cattle futures are reversing prior gains, declining sharply by $4.90 to $5.35, with August feeders down $5.35 to $304.875. This bearish sentiment in the futures market is further underscored by the CME Feeder Cattle Index, which decreased by $3.21 to $313.89 on June 13. In contrast to the futures market weakness, wholesale boxed beef prices continue their upward trajectory, with Choice boxes increasing by $3.07 to $385.18 and Select boxes rising by $2.79 to $370.26, widening the Choice/Select spread to $14.92. A critical factor is the reduced cattle slaughter volume; Monday's federally inspected slaughter was estimated at 103,000 head, significantly lower than the previous week by 9,000 head and down 12,735 head compared to the same week last year. The lack of established cash trade for the week adds an element of uncertainty to near-term price discovery, while overall market sentiment is reported as moderately negative, aligning with the futures' performance.

Key Decisions for Investors

• Investors should exercise caution regarding new long positions in cattle futures given the sharp declines and prevailing negative sentiment, and monitor for potential short-term support levels.
• Closely observe the cash cattle trade development this week, as its direction will provide crucial signals for near-term price direction and could confirm or counter the current weakness in the futures market.
• Analyze the divergence between falling futures and rising physical boxed beef prices, alongside significantly lower slaughter rates, as this could indicate a potential mispricing or an upcoming shift in market dynamics.
• Continue to track slaughter volumes and wholesale beef demand, as sustained low slaughter figures and strong beef prices might suggest underlying market tightness not yet fully reflected in the current futures sell-off.