7 February 2025

2 minute read

The latest trading session on the Chicago Mercantile Exchange (CME) saw live cattle and feeder cattle futures decline, reaching their lowest levels in four weeks. This downturn is attributed to a notable decrease in cash prices, indicating a diminished demand for livestock, as reported by Reuters.

In contrast, lean hog futures concluded the trading day with a slight uptick. Despite the overall bearish sentiment in the cattle market, the hog sector displayed resilience, showcasing a divergence in market trends.

The recent decline in cash prices for cattle has had a cascading effect on futures contracts, particularly after they had previously surged to record highs. The primary driver behind this volatility is the significant reduction in U.S. cattle inventories, which are now at their lowest levels in decades. Traders highlighted that commodity funds had previously bolstered market rallies by establishing long positions—essentially betting on rising prices.

“Cattle got way ahead of themselves and they needed to correct,” stated Tomm Pfitzenmaier, an analyst with Summit Commodity Brokerage. He elaborated that the market was heavily weighted with long positions, suggesting a potential for correction and adjustment.

In the most-active CME April live cattle futures, prices dropped 4.525 cents, settling at 196.775 cents per pound. Meanwhile, March feeder cattle futures fell by 5.425 cents to close at 265.3 cents per pound. Notably, both contracts reached their lowest values since January 8, underscoring the market’s current bearish trend.

This tightening of cattle supplies has contributed to rising beef prices for consumers. Processors, including major players like Tyson Foods, are now facing increased costs for livestock procurement, complicating their operational margins. According to estimates from livestock marketing advisory service HedgersEdge.com, meatpackers were incurring losses exceeding $200 for each head of cattle processed on Thursday, a significant increase from the approximate $132 loss per head just a week prior.

As a response to these market dynamics, processors have adjusted their slaughtering schedules, reducing the number of cattle processed to an estimated 118,000, down from 122,000 the previous week, as reported by the U.S. Department of Agriculture (USDA).

Adding to the market’s challenges, the USDA reported a decline in choice boxed beef cutout values, further complicating the landscape for cattle producers and processors alike. “If it wasn’t bad news, cattle would have no news today,” remarked Brian Hoops, president of brokerage Midwest Market Solutions, emphasizing the current bearish outlook.

On a more optimistic note, traders have expressed relief regarding the potential risks of tariff disputes with Canada and Mexico, which could have hindered the movement of livestock into the United States. Recent developments indicate that U.S. President Donald Trump has postponed proposed tariffs on these neighboring countries for an additional month, easing some concerns in the market.

Moreover, the USDA announced its decision to resume cattle imports from Mexico, which had been previously suspended since late November due to the discovery of a pest. This resumption is expected to positively influence the supply dynamics in the cattle market.

Turning to the hog market, April futures saw a modest rise of 0.2 cents, concluding the session at 91.750 cents per pound. This uptick in lean hog futures contrasts sharply with the struggles observed in the cattle sector, indicating varying demand trends across different segments of the livestock market.

In summary, the trading session highlighted significant bearish trends in the cattle market due to decreasing cash prices and tight inventories, while the lean hog market showed slight resilience. As various factors continue to play out, including the impact of supply dynamics and potential trade developments, stakeholders in the livestock industry are closely monitoring these trends to inform their trading strategies and operational decisions.