Live Cattle Dec '18 (LEZ18)
|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) pushed higher in early 2018 and posted the high for the year in February at $1.30525 a pound. Robust foreign demand for U.S. beef was positive for prices in early 2018 as U.S. 2017 beef exports rose +12% yr/yr to 2.862 bln lbs and the USDA projected U.S. 2018 beef exports would rise +5.7% yr/yr to a record high 3.025 bln lbs. Cattle prices then tumbled to a 2-year low of $1.1010 a pound in April on demand concerns and abundant supplies. The Trump administration's imposition of tariffs attracted retaliatory tariffs on a range of U.S. farm exports. China announced a 25% tariff on U.S. beef exports to China. Cattle prices were also undercut by supply concerns after the USDA projected that U.S. 2018 beef production would rise +5.8% yr/yr to a record 27.752 bln lbs. Also, the September Cattle on Feed report showed cattle on feed as of September 1 rose +5.9% yr/yr to a record for a September at 11.125 mln head as the number of cattle on feed climbed for twenty straight months. In addition, the August Cold Storage report showed U.S. beef supplies in cold storage rose to a record high for the month of August of 503.449 mln lbs. Cattle prices then crept higher into year-end as foreign demand for U.S. beef remained firm despite trade frictions. U.S. 2018 beef exports Jan-Oct were up +12% yr/yr at 2.627 bln lbs. Cattle prices finished 2018 slightly higher by +1.5% yr at $1.2480 a pound.
Supply - The world's number of cattle as of January 1, 2019, rose +0.5% to 1.007 billion head. As of January 1, 2018, the number of cattle on farms in India (the world's largest herd) rose +0.5% to 306.500 million head and on Brazilian farms (the world's second largest herd) rose by +2.5% to 238.150 million head. As of January 1, 2019, the number of cattle and calves on U.S. farms rose by +0.6% yr/yr to 95.000 million head. The USDA reported that U.S. commercial production of beef in 2017 rose 4.3% yr/yr to 27.590 billion pounds.
Demand - The federally-inspected slaughter of cattle in the U.S., a measure of cattle consumption, rose by +3.0% yr/yr to 32.654 million head in 2018, up from the 5-decade low of 28.296 million head in 2015.
Trade - U.S. imports of live cattle in 2018 fell -.05% yr/yr to 1.796 million head. U.S. exports of live cattle in 2017 rose +180.1% yr/yr to 194.600 head, up sharply from last year's 69,500. U.S. imports of beef in 2018 rose +1.0% to 3.025 billion pounds. U.S. exports of beef in 2018 rose +9.2% yr/yr to 3.124 billion pounds, a new record high.
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