![]() ![]() Released on Fridays toward the end of January and July, the U.S. So what are the key indicators of supply and demand for feeder cattle? Here are the critical events and data points: USDA Cattle Inventory Reports In these instances, it’s beneficial for livestock producers and speculators to trade feeder cattle futures to hedge risk or capitalize on pricing volatility. When supply and demand are in disequilibrium, we see either a bullish (demand exceeds supply) or a bearish (demand lags supply) move in prices. Feeder Cattle 101: Market Drivers, Keys to WatchĪs with most commodity futures, the evolving relationship between supply and demand is the quintessential underpinning of the feeder cattle market. Although each of these contracts technically faces cattle, they serve very different purposes for hedgers and speculators. It’s important to remember that feeder cattle futures differ from the CME’s other beef livestock listing, live cattle futures (LE). Note: Eight contracts per year are listed, with January, March, April, May, August, September, October, November expiries. Here are the contract specifications: Contract Listed for trade on the Chicago Mercantile Exchange (CME), feeder cattle futures are contracts that price the value of beef at some future point in time. When they reach 1,200-1,400 pounds, the steers and heifers are then slaughtered to produce beef. When they reach the 600- to 800-pound threshold, steers (castrated males) and heifers (females yet to calve) are then fed a high-calorie diet designed to promote weight gain. Feeder cattle are those designated solely for the production of beef.īy definition, feeder cattle are weaned calves that weigh between 600-800 pounds. ![]() Accordingly, there are several different types of cattle, each defined by its function. Like wheat, corn, soybeans, and even gold, cattle are a commodity. Let’s take a look at what you need to know before getting started in this exciting and opportune market. If the FAO is correct, then feeder cattle futures are likely to explode in both size and popularity in the next decade. According to the United Nations Food and Agriculture Organization (FAO), these figures will only rise in the coming years. alone accounted for approximately 27 billion billion pounds, making it a primary contributor to the $1 trillion annual meat and poultry industry. On a global scale, about 134 billion pounds of beef are consumed every year. This form is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.Beef is one of the most sought-after agricultural products. Spam protection has stopped this request. Strong market expectations also mean there may be some attractive risk management opportunities for producers depending on your goals. The spring 2023 contracts are currently trading near $190 which, if actually observed, would mean feeder cattle prices not seen since 2015. Contract prices are up approximately $10 per CWT across all contracts since June 1. The dotted line represents prices from June 1 st. The solid line in the chart above represents contract prices as of last Friday. It is also worth noting that a continued increase during the winter would happen at a time when feeder cattle prices typically face seasonal pressure (chart at bottom). This is a clear signal that traders are expecting feeder cattle prices to increase into 2023. The August 2022 contract is currently the lowest price of the set, and every consecutive contract is higher than the previous. Looking at contract prices across months allows us to consider market expectations for cattle markets into next year. The chart above shows the actively trading contracts by expiration month through April 2023. However, there are also other feeder cattle contracts currently trading, with the only difference being the expiration month. For example, the “nearby,” or closest to expiring, contract is the August 2022 contract. There are separate contracts for different months in the future. The CME Feeder Cattle futures contracts reflect expected prices per hundred weight (CWT) for 700-899 pound feeder cattle within a 12 state region that includes the bulk of feeder cattle sales. In this week’s newsletter, we’ll look at Feeder Cattle futures markets. ![]() The December Corn futures contract is down more than $1 per bushel since mid-June which also has a positive impact on cattle market expectations. Tighter supplies are expected to be a main driver of stronger cattle prices over the next few years. Last week, James discussed the July Cattle Inventory report and the tightening supplies of cattle. – Josh Maples, Assistant Professor & Extension Economist, Department of Agricultural Economics, Mississippi State University ![]()
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