US Cattle Market Faces Significant Pressure
Chicago Mercantile Exchange witnessed another day of declining cattle futures on Thursday as persistent fund selling and weakening cash prices continued to drag the market downward. The downward trend has been ongoing for the past month, creating substantial challenges for traders and industry participants.
Trump's Intervention Shakes Cattle Markets
The current market turbulence began when U.S. President Donald Trump announced his commitment to reducing beef prices for American consumers. This declaration triggered massive selloffs in cattle futures, forcing numerous traders to exit their positions entirely. The presidential intervention came at a time when beef prices had reached record highs following years of drought conditions that devastated pasture lands nationwide.
The prolonged dry spell compelled ranchers to significantly reduce the country's cattle herd, bringing it to its smallest size in decades. Despite these supply constraints, consumer demand for beef products including steaks and hamburgers has remained remarkably strong throughout this period.
Market Performance and Expert Analysis
Brian Hoops, president of Midwest Market Solutions, provided crucial insight into the market dynamics. "The fundamentals are not weak for cattle, but the fund selling is relentless," Hoops explained. "They are still likely net long and are using any small rallies as selling opportunities to get out of long positions."
Specific contract performances revealed the extent of the decline. CME February live cattle futures closed down 1.85 cents at 215.400 cents per pound, while January feeder cattle futures experienced a more substantial drop of 5.075 cents, ending at 316.375 cents per pound.
The cash market mirrored the futures decline, with dressed cattle trading at $345 per hundredweight in northern regions on Wednesday, representing a $5-$6 decrease from the previous week. Southern markets saw live cattle trading at $224 per hundredweight, down $3-$4 from last week's levels.
Industry Awaits Critical USDA Report
Market participants are now anticipating the release of the U.S. Department of Agriculture's Cattle on Feed report scheduled for Friday. This report carries additional significance since the agency skipped the October edition due to the federal government shutdown. Analysts project that the inventory of cattle on feed in U.S. feedlots as of November 1 decreased by 2.2% compared to the same period last year.
Hoops commented on the upcoming report's potential impact: "Tomorrow's COF report should be bullish for the industry, but until the technicals improve, fundamentals don't mean a lot." He also noted the puzzling behavior of meatpackers, stating, "Packers are also increasing kills, which should mean they need more cattle and would pay more for the cash inventory, but with the futures in a free fall, that isn't happening either."
According to USDA data, meatpackers processed an estimated 120,000 cattle and 494,000 hogs on Thursday, maintaining levels consistent with the previous week. In contrast to the cattle market performance, CME February lean hog futures showed modest gains, finishing up 0.625 cent at 79.650 cents per pound.
