Cattle Futures Experience Technical Retreat After Record Surge

On March 21, 2023, cattle futures at the Chicago Mercantile Exchange faced a slight downturn following an impressive streak of gains that saw many contracts reach historic highs. The CME June live cattle contract closed at 202.775 cents per pound, down by 2.250 cents, yet it marked the third consecutive day of record-breaking prices. Meanwhile, the CME April feeder cattle contract saw a drop of 3.475 cents, settling at 284.975 cents per pound after achieving life-of-contract highs for four straight days.

Overbought Conditions and Market Sentiment

Cattle futures have been on a remarkable run, but the recent pullback has left some analysts questioning the sustainability of these prices. Karl Setzer, a partner at Consus Ag Consulting, noted, “Cattle futures really started to get overbought, and it really overextended to the upside.” This sentiment reflects concerns that the market may have gotten ahead of itself after an extended period of rising prices.

Weather Impacts on Cattle Movement

Inclement weather, specifically high winds and blizzard conditions in Kansas and Nebraska, has disrupted cattle movement, contributing to market fluctuations. Earlier in the week, road closures, including Interstate 80 in Nebraska, hindered the transportation of cattle to slaughterhouses, further complicating the supply chain.

Consumer Demand and Economic Concerns

In addition to weather-related challenges, worries about consumer demand are also influencing the cattle market. Setzer highlighted that recent remarks from Federal Reserve Chair Jerome Powell have raised concerns about economic growth. Powell indicated that past policies, including significant import tariffs from the Trump administration, might be affecting inflation and slowing economic activity.

USDA Data and Market Reactions

The U.S. Department of Agriculture (USDA) reported a decline in wholesale boxed beef prices, with choice cuts decreasing by $2.61 to $325.45 per hundredweight (cwt), while select cuts increased by $0.26 to $309.62. Traders are also anticipating the USDA’s monthly cattle on feed report, which indicated an 18% decrease in cattle numbers on U.S. feedlots compared to the previous year—surpassing analysts’ expectations of a 14% decline.

Lean Hogs See Positive Movement

In contrast, the CME April lean hog contract experienced a rebound, closing at 86.125 cents per pound, up 0.575 cent after a three-day decline. This technical bounce may signal a shift in market dynamics for hog traders.

As the cattle market navigates these challenges, stakeholders will be closely monitoring both weather conditions and economic indicators to assess future trends.