The Merc has plenty of money for marketing and II can use some.
Paging the former Secretary of State.*
From the CME via Institutional Investor, November 27:
AT A GLANCE
- Retail beef prices hit a record in July, as base demand across all grades, from prime to select, remained “incredibly good”
- Trading volume in Feeder Cattle and Live Cattle futures and options set records in 2023 as processors and others managed price risk
Cattle supplies are tight and are likely to stay that way for the next few years as drought and high input prices will limit herd expansion.
A smaller herd comes at a time when beef demand remains strong, and that is driving cattle prices higher. Since bottoming during the depths of the COVID-19 pandemic in spring 2020 at $81.45 per hundredweight (cwt), front-month live cattle futures prices have more than doubled, trading around $185 in fall of 2023. Feeder Cattle futures have seen a similar jump in values over that time. Given the biological nature of raising cattle, it will take a few years for inventories to bottom and herd expansion to begin, completing the cattle cycle.
“The earliest opportunity for any increase in production would be in late 2026, and in all likelihood, 2027,” says Don Close, chief research and analytics officer for Terrain Ag.
In January, the U.S. Department of Agriculture estimated U.S. cattle inventory at its smallest level in eight years, at 89.3 million head. Beef cow supplies are at the lowest level since 1962, at 28.9 million head.
The tight market conditions have shown up in cattle futures and options trading in 2023 as producers and others manage their price risk. Average daily trading volume in Feeder Cattle futures and options reached a combined record of 20,865 contracts per day. Open interest – the number of unsettled contracts – also reached a combined 120,046 record. Live Cattle futures and options also saw record trading at a combined 83,347 contracts per day.
Drought, High Costs Limiting Expansion....MUCH MORE
David Weaber, beef analyst at Terrain Ag, says drought drives cow slaughter and limits herd expansion. Feed costs have been high as CBOT corn and soybean prices were elevated for much of the year. Pasture and range conditions remain lackluster, so ranchers are supplementing with hay, adding to expenses.
The jump in interest rates after the Federal Reserve’s rate-tightening cycle has also prevented expansion, he says, as the interest costs to finance and buy cattle have doubled. “That’s another $100, $125, a head of revenue that you have to make up for,” he says....
*Hillary smiles as the newbies take on one of the toughest (and oldest) markets in the world. The former Secretary of State famously ran $1000 to $100,000 in ten months of astounding cattle futures action:
"This is like buying ice skates one day and entering the Olympics a day later," 'says Mark Powers, editor of the Journal of Futures Markets. "She took some extraordinary risks."
