Cattle Futures Rally: Record Cash Prices Fuel Continued Bullish Sentiment
John Simpson – January 24, 2025
As I discussed in my January 10 article, I’ve remained bullish on the cattle markets, and today’s surge in cattle futures proves that the outlook I outlined is playing out. The cattle market continues its bullish run, driven by tight supplies, strong demand, and weather-related challenges that are squeezing the market in ways we haven’t seen in decades.
Recently, cash cattle prices have surged to unprecedented levels, with reports showing prices as high as $212-$213 per hundredweight in some regions. These record-high prices reflect a combination of factors, but the most notable is the ongoing contraction in the U.S. cattle herd. According to the USDA, we’re looking at the smallest U.S. cattle herd since 1951, which is dramatically reducing the number of market-ready cattle available for slaughter (USDA Market Report).
Tight Supplies and Robust Demand Drive Prices Higher
The combination of reduced cattle numbers and strong consumer demand for beef is continuing to push prices higher. USDA data shows that frozen beef stocks are well below the five-year average, further underscoring the tightness in supply. This is exactly the scenario I’ve been predicting: tight supply in the face of steady-to-strong beef demand is a bullish setup that can’t be ignored.
Retail beef sales jumped 9% in 2024, according to The Wall Street Journal. Consumers have shown resilience despite the record-high prices, prioritizing beef as a key part of their diets. This strong domestic spending power has kept demand firm, even as prices climb.
The cold weather across key cattle-producing states has also had a disruptive effect on grazing conditions, adding further pressure to the already limited supply. When you combine the impact of the weather with reduced herd numbers, the result is a market that’s going to stay tight for the foreseeable future. This is exactly why I’ve been so bullish: the supply constraints are real, and they are showing up in the market in a big way.
Cattle Futures Surge, but What’s Next?
As a result of these tight supplies, live cattle futures have surged, with February contracts recently trading above $204. This reflects the growing concern about limited supply, and it seems like traders are catching on to the bullish trend I’ve been highlighting for some time. In fact, my target for April live cattle futures is now as high as $210, and I believe the market could continue to push higher in the coming months as the supply-demand imbalance persists.
As for feeder cattle, the rally in this segment has been even more impressive. I’m now targeting March feeder cattle contracts as high as $280, possibly even as high as $285. With the ongoing challenges in the cattle supply chain, coupled with the strong demand for beef, these price levels seem increasingly within reach. The continued tightening of feeder cattle availability combined with rising feed costs should keep upward pressure on prices.
Feeder Cattle and Technical Momentum
Feeder cattle prices are also experiencing significant rallies, driven by similar supply-demand dynamics. The lack of available feeder cattle for future market-ready supply is adding to the bullish sentiment in the feeder cattle futures market. With the potential for higher feed costs, there’s a real concern that the number of feeder cattle will continue to be constrained, supporting higher prices.
Furthermore, technical momentum in both the live and feeder cattle futures markets is playing a role. As I’ve mentioned before, the charts are showing a bullish pattern, and technical traders have been driving prices higher. The combination of solid fundamentals and strong technicals has created a perfect storm for higher prices.
Looking Ahead: Is the Rally Sustainable?
Looking ahead, I remain bullish on cattle futures, though I do acknowledge that short-term volatility is always a risk. We could see some consolidation or profit-taking in the short term, but the fundamentals continue to support a strong market. Tight cattle supplies, strong consumer demand, and solid export numbers make it hard for the market to move lower for any extended period.
That said, the real question will be how the broader economy, including factors like the strength of the U.S. dollar, plays out. The dollar has the potential to limit the upside for exports, and that could be a headwind for the market in the medium term. However, as long as the domestic supply-demand dynamic remains tight, I believe the cattle market will continue to outperform, as it has over the past several months.
Conclusion: A Market in the Driver’s Seat
In my opinion, the cattle market is firmly in the driver’s seat. The combination of record-high cash prices, strong consumer demand, and tight supplies is a powerful mix that I see continuing into 2025. While other sectors, like the hog market, are battling volatility and external pressures (such as the strong dollar), the cattle market’s fundamentals remain rock-solid.
For now, I continue to view this market as bullish. The price action we’ve seen in both live cattle and feeder cattle futures reflects the strength of these dynamics, and I’m not expecting this rally to fizzle out anytime soon.
Sources:
- U.S. Department of Agriculture (USDA), Cattle Inventory Report, January 2025.
- National Cattlemen’s Beef Association (NCBA), Market Updates and Trends.
- The Wall Street Journal, Retail Beef Sales Data, 2024.
- CME Group, Live Cattle and Feeder Cattle Futures Data.
- Trading Economics, U.S. Dollar Index.
As always, this is just my opinion and should not be considered as financial advice. Market conditions can change rapidly, and it’s essential to stay informed and manage risk accordingly.
If you’re looking to navigate these markets with confidence, consider opening a futures trading account today. Let’s turn these insights into actionable strategies for your portfolio.
If you would like to recieve more information on the commodity markets, please use this link to join my email list.
John S. Simpson Jr. Senior Market Strategist Walsh Trading
Direct 1-312-957-8108 or Toll Free 1-800-556-9411
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices.PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71