Cattle Futures Stumble as USDA Report Reveals Shrinking Herd
Live cattle futures ended Friday's session on a mostly softer note, with traders digesting the latest snapshot of the nation's herd size. The USDA's annual Cattle Inventory report, released after the market close, indicated a 0.37% year-over-year decline to 86.155 million head of all cattle and calves. This contraction, driven by a 1.02% drop in the beef cow population, underscores the long-term supply constraints that have characterized the market.
"The report confirms what the industry has been feeling on the ground—herds are still rebuilding slowly," said Michael Rivera, a market analyst with Heartland Commodities. "The modest increase in replacement heifers is a positive signal for future production, but it doesn't alleviate immediate tightness. This fundamental backdrop is why we're seeing managed money maintain such a significant net-long position."
In Friday's trading, most live cattle contracts fell between 47 cents and $1.75. The February contract proved an outlier, rising 35 cents to close at $235.850, buoyed by strength in cash markets where prices settled between $238 and $240 per cwt nationally. Feeder cattle futures faced sharper losses, dropping nearly $5 in nearby months.
The cash trade provided a counterpoint to the futures weakness. The weekly Fed Cattle Exchange auction saw over 700 head sell at $240-$241, and wholesale boxed beef prices were mixed in the afternoon report. The Choice/Select spread narrowed to $3.62, with Choice carcasses at $365.56.
"The disconnect between futures and cash is frustrating but not uncommon," commented Sarah Chen, a veteran cattle producer from Nebraska. "The futures market is trying to price in everything from feed costs to consumer demand months out, while the cash market is dealing with the reality of getting cattle to the packer next week. The inventory numbers tell me we're not out of the woods on high prices yet."
A more critical perspective came from David Fletcher, a financial blogger focused on agricultural markets. "The market is schizophrenic," Fletcher stated bluntly. "On one hand, we have a report showing fewer cattle. On the other, futures sell off and slaughter numbers are down sharply from last year. It feels like speculative money is driving the bus, not fundamentals. The producer is getting squeezed from both sides."
The Commitment of Traders report supported the view of strong speculative interest, showing managed money adding to its net-long stance in live cattle futures and options in the latest week. Meanwhile, estimated cattle slaughter for the week came in at 531,000 head, notably below the pace seen a year ago.
Closing Prices: Feb 26 Live Cattle: $235.850 (+$0.350); Apr 26 Live Cattle: $236.800 (-$0.475); Jun 26 Live Cattle: $231.725 (-$1.550); Mar 26 Feeder Cattle: $360.275 (-$4.850); Apr 26 Feeder Cattle: $358.275 (-$4.950); May 26 Feeder Cattle: $355.125 (-$4.850).
On the date of publication, Austin Schroeder did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com.