Live Cattle Jun '18 (LEM18)
|Tick Size||0.025 cents per pound ($10.00 per contract)|
|Daily Limit||3 cents per pound ($1,200 per contract) Expanded limit 4.5 cents|
|Contract Size||40,000 pounds|
|Trading Months||Feb, Apr, Jun, Aug, Oct, Dec (G, J, M, Q, V, Z)|
|Trading Hours||8:30a.m. - 1:05p.m. (Settles 1:00p.m.) CST|
|Value of One Futures Unit||$400|
|Value of One Options Unit||$400|
|Last Trading Day||The last business day of the contract month|
The beef cycle begins with the cow-calf operation, which breeds the new calves. Most ranchers breed their herds of cows in summer, thus producing the new crop of calves in spring (the gestation period is about nine months). This allows the calves to be born during the milder weather of spring and provides the calves with ample forage through the summer and early autumn. The calves are weaned from the mother after 6-8 months and most are then moved into the "stocker" operation. The calves usually spend 6-10 months in the stocker operation, growing to near full-sized by foraging for summer grass or winter wheat. When the cattle reach 600-800 pounds, they are typically sent to a feedlot and become "feeder cattle." In the feedlot, the cattle are fed a special food mix to encourage rapid weight gain. The mix includes grain (corn, milo, or wheat), a protein supplement (soybean, cottonseed, or linseed meal), and roughage (alfalfa, silage, prairie hay, or an agricultural by-product such as sugar beet pulp). The animal is considered "finished" when it reaches full weight and is ready for slaughter, typically at around 1,200 pounds, which produces a dressed carcass of around 745 pounds. After reaching full weight, the cattle are sold for slaughter to a meat packing plant. Futures and options on live cattle and feeder cattle are traded at the CME Group. Both the live and feeder cattle futures contracts trade in terms of cents per pound.
Prices - CME live cattle futures prices (Barchart.com electronic symbol LE) moved sideways in early 2017 as robust beef supplies limited the upside in cattle prices. The monthly Cattle on Feed report showed that beef supplies in cold storage in December 2016 jumped +10.6% yr/yr to 567.000 mln lbs, the most for a December since records began in 1915. In April 2017, however, cattle prices rallied sharply to a 2-year high of $1.3890 a pound on speculation China would soon begin importing U.S. beef, which it halted back in 2003 due to a case of mad cow disease in the U.S. Cattle prices then reversed and trended lower into August when they posted the low for 2017 of $1.0405 a pound. That low was caused by the outlook for abundant beef supplies after the USDA in the Aug 10, 2017 WASDE report boosted its U.S. 2017/18 beef production estimate to a record 27.427 bln lbs, up +2.5% yr/yr. Cattle prices then recovered and moved higher into the end of the year on tighter beef supplies and strong foreign demand. The monthly USDA Cold Storage report showed U.S. beef supplies in cold storage in October 2017 fell -8.3% yr/yr, the tenth consecutive year-over-year decline. Meanwhile, foreign demand for U.S. beef supplies was solid with U.S. 2017 beef exports up +12% yr/yr to 2.862 bln lbs. Looking ahead, the USDA projects U.S. 2018 beef exports will rise +5.7% yr/yr to a record high 3.025 bln lbs. Cattle prices finished 2017 up by +3.4% yr/yr at $1.2300 a pound.
Supply - The world's number of cattle as of January 1, 2018, rose +0.9% to 1.004 billion head. As of January 1, 2018, the number of cattle on farms in India (the world's largest herd) rose +0.5% to 305,000 million head and on Brazilian farms (the world's 2nd largest herd) rose by +2.8% to 232,350 million head. As of January 1, 2018, the number of cattle and calves on U.S. farms rose by +0.98% to 94.399 million head. The USDA is forecasting that U.S. commercial production of beef in 2017 rose 4.3% to 27.590 billion pounds.
Demand - The federally-inspected slaughter of cattle in the U.S., a measure of cattle consumption, rose by +5.3% to 3.704 million head, up from the 5-decade low of 28.295 million head in 2015.
Trade - U.S. imports of live cattle in 2017 rose by +3.6% to 1.769 million head. U.S. exports of live cattle in 2016 fell -4.2% to an estimated 69.500 head, down sharply from 193,908 posted as recently as 2011. U.S. imports of beef in 2017 fell -1.6% to 2.366 billion pounds. U.S. exports of beef in 2017 rose +12.5% to 2.875 billion pounds, a new record high.
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