Live Cattle Futures Hit Record High

Cattle Futures Climb as Supplies Shrink

By Amanda Brodhagen, Farms.com

Live cattle futures reached a record high last week and it’s believed that shrinking cattle herds in the U.S. - given the severe drought in the Farm Belt this past summer, has been as a major catalyst for the climbing live cattle futures.

Futures for live cattle have been steadily climbing for the past three weeks, especially since traders predict that cash prices for cattle will eventually increase as a direct response to shorter supplies.

A report from the U.S. Department of Agriculture back in Dec. 2012 said that the number of young beef cattle headed for feed lots declined in Nov. 2012 for the sixth straight month. This market pattern is a sure sign that domestic cattle supplies will be tight in the first half of 2013.

The U.S. drought has been especially worrisome for cattle ranchers in Oklahoma and Texas who have been struggling to maintain their livelihoods as the heat and lack of rainfall have left pastures barren and feedstuffs scarce and expensive. The U.S. cattle herd has been on a steady decline in recent years, but it’s now reached a six-decade low.

Another factor contributing to the jump in live cattle futures is the increase investment in the market by hedge funds.

It’s been predicted that the cattle prices will soon hit U.S. beef consumers over the next few months as the supply chain will continue to pass along their higher costs to food retailers and restaurants, which will eventually get picked up by the consumer.

The U.S. Department of Agriculture outlook for 2013 is that total beef production will drop 5% to 24.5 billion pounds from 2012.