Cattle Extending All Time Highs on Monday

Live cattle futures are trading higher, with nearby contracts up as much as 82 cents amid first notice day for June live cattle. Cash trade saw prices ranging from $225-232 in the South and $240-244 in the North last week. Large managed money speculators increased their net long position in live cattle futures and options by 512 contracts to 131,805 as of June 3rd, while feeder cattle also saw gains and USDA's boxed beef prices showed Choice boxes at $366.61 and Select at $359.88/cwt.

Analysis

Live cattle futures demonstrated upward momentum, with nearby contracts gaining up to 82 cents on Monday, coinciding with the first notice day for June live cattle. This futures market strength was mirrored in the cash cattle sector, where prices last week ranged from $225-$232 in the South, reaching up to $235, and $240-$242 in the North, with some transactions hitting $244. Reinforcing this bullish sentiment, large managed money speculators augmented their net long position in live cattle futures and options by 512 contracts to 131,805 contracts for the week ending June 3rd. Similarly, feeder cattle futures saw gains between 12 to 42 cents, and managed money increased their net long position by 1,569 contracts to a record 34,827 contracts as of the same date. The CME Feeder Cattle Index also reflected this positive trend, rising $1.30 to $306.16. In the wholesale beef market, national prices were higher; although Choice boxes experienced a slight decrease of $1.53 to $366.61, Select boxes rose significantly by $3.15 to $359.88 per cwt, narrowing the Choice/Select spread to $6.73. Further supporting a tighter supply outlook, USDA's federally inspected cattle slaughter for the previous week was reported at 582,000 head, a decrease of 27,797 head compared to the same week last year.

Key Decisions for Investors

• Investors with existing long positions in live and feeder cattle futures may consider maintaining them, given the confluence of positive price momentum, strong cash market signals, and increased net long positioning by managed money.
• The significant rise in Select beef prices to $359.88/cwt and the resultant narrowing of the Choice/Select spread to $6.73 warrants close monitoring, as it could signal broadening consumer demand or specific supply tightness in non-premium grades, potentially influencing relative value strategies.
• While reduced cattle slaughter (down 27,797 head year-over-year) and record managed money net long positions in feeder cattle (34,827 contracts) are bullish indicators, investors should remain vigilant for potential profit-taking or shifts in speculative sentiment given these historically high levels of bullish positioning.