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What Moves the Live Cattle Futures Price?

live cattle price study

Live cattle futures price is affected by demand from meat manufacturers, grocery and restaurant chains. Live cattle is raised for beef.

The largest segment of American agriculture has seven major states that produce it. These states include Texas, Arizona, California, Colorado, Iowa, Kansas, and Nebraska. It is used for selling as meat and the by-products. Futures contracts are the means by which this commodity is traded.

Live cattle is traded on the CME (Chicago Mercantile Exchange). It is also traded on the Brazilian Mercantile and Futures Exchange (BMF). The first futures contract in the U.S. on a live animal was introduced in 1964 by the CME. Cattle-raising dates back over 85 centuries and was first imported into the U.S. in 1623.

Daily Live Cattle Prices (CME)

Factors Affecting Live Cattle Futures Price

Live cattle auctions are held regularly and the auction reports influence the prices. Another factor that may influence live cattle futures price is bad weather that impacts the deliverance of supplies. Sometimes the weather factor can affect the price on a long-term basis.

Though many issues that affect prices can be domestic, exports can alter price as well due to shipment rejection for whatever reason. Even a nation resuming beef imports can have pricing consequences. The futures traders who are involved with the beef industry can also affect pricing by stabilizing price fluctuations.

Other elements that may influence live cattle futures price include mad cow disease, methane production from the digestive systems of cattle, and imported beef. First, mad cow disease can lead to the banning of import and export supplies in order to alleviate spreading the disease.

Japan is one of the largest importers of beef and had to ban the imports based on an outbreak in Texas in 2004. Though the ban was eventually lifted, serious restriction consequences remained.

live cattle point and figure chart

The digestive system of cows produces methane that is considered a gas emission that is harmful to the environment and responsible for about 18% of greenhouse gas emissions. And, last but certainly not least, is beef imports. The United States still imports although it does produce about a quarter of the world’s beef production.

Other countries involved in the live cattle trade include Brazil, who was able to expand their import of beef when Japan applied the ban. China has not tapped in their market on the beef trade.

Supply affects Live Cattle Futures Price

The cattle supply is at the lowest from the historical lowest in May of 1958. Live cattle futures price is now higher than they have been in the past 22 months.  There is still apprehension on Japan’s part for import and that speculation has caused a rise in the live cattle futures futures prices.

This pricing has definitely been affected by the earthquake and tsunami that happened recently this year. Live cattle futures price are due to rise based on the state of the economy and supply/demand.

In summary, from mad cow disease to imports, price fluctuation does occur due to any of the situations previously mentioned. Even the impact of bad weather can be adverse on a short or long-term basis as we have seen from the Japan tsunami and earthquake with the potential radiation exposure.

All these are serious issues that can affect the live cattle futures price.

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