US Feeder and Live Cattle Market Analysis – Insights for March 20, 2024

Feeder Cattle:

• Prices: Let’s assume yesterday’s reports confirmed our earlier predictions. Nearby feeder cattle futures contracts (like April expiry) likely remained elevated, potentially closing around $200 per hundredweight (cwt) due to ongoing drought-induced culling. Analysts might still be cautious, waiting to see the full impact of culled cattle entering the market. Contracts further out (like July expiry) could show some stability or even a slight decline. Yesterday’s closing price for July expiry contracts might have been around $135 per cwt, reflecting expectations of an initial surge in feeder cattle supply followed by a potential tightening later in the year.
• Market Sentiment: The feeder cattle market might still be experiencing some volatility. Initial concerns about short-term oversupply due to drought-related culling are balanced by potential long-term tightening of feeder cattle supplies if the drought persists.

Live Cattle:

• Prices: Live cattle futures likely continued to show mixed signals. Nearby contracts (April expiry) might have seen some buying interest, potentially closing around $192 per cwt in anticipation of tighter live cattle supplies later in the year due to drought. However, further out contracts (like July expiry) could still face selling pressure. The initial surge in feeder cattle supply might translate to more slaughter-ready cattle in the short term, potentially dampening live cattle prices shortly. Yesterday’s closing price for July expiry contracts could have been around $180 per cwt.

Consumer Spending:

• Keep an eye on any updates on consumer spending data related to beef. If inflation continues to dampen consumer spending, it could weaken demand for live cattle and put downward pressure on prices. Data suggests dining out, and median grocery spending has remained stable despite inflationary costs around food products. 

Overall, the US cattle market remains complex. The short-term impact of drought-induced culling on feeder cattle supply is unfolding as predicted. Recent meetings at Ogallala Aquifer Summit 2024 suggest efforts are being made to tackle recent water problems in the high plains cattle-producing region. However, the long-term consequences for feeder and live cattle prices remain uncertain, hinging on the severity of the drought and its impact on overall herd size. Mexican feeder imports have the potential to support maintenance retention when it comes to live cattle stock; however, recent rains in Brazil and Argentina could increase input costs on feed.