Live Cattle Dec '19 (LEZ19)
|Tick Size||0.00025 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 with 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
Prices - CME live cattle futures prices (Barchart.com electronic symbol LE) moved higher in Q1-2019 and posted a 2-year high and high for the year in March at $1.30450 a pound. Cattle prices found support as the outbreak of African swine fever throughout Asia slashed hog supplies and pork production and bolstered expectations for increased beef consumption. Also, late-winter storms in the Great Plains decimated cattle herds after the USDA said nearly a million calves were lost in a Nebraska flood in March of 2019. Tightness in the cattle market pushed cash cattle prices up to a 2-1/2 year high in April, which also underpinned cattle futures prices. However, cattle prices couldn't hold their gains and sold off into Q3-2019 by plunging to a 9-1/2 year low in September at $0.9340 a pound. Trade tensions undercut U.S. beef exports with U.S. 2019 Jan-Nov beef exports down -4.6% y/y to 2.767 bln lbs. The outlook for increased cattle supplies also weighed on prices after a fire in August shut a Tyson Foods slaughterhouse in Kansas, one of the biggest U.S. cattle processing plants. The shutdown of the Tyson plant created a livestock glut that undercut the cash market as cash cattle prices plunged to a 9-1/4 year low in September. Cattle prices recovered sharply into year-end on improved prospects for an increase in U.S. beef exports after China agreed to buy more U.S. ag products as part of the US/China phase-one trade deal reached in December 2019. Cattle prices finished 2019 little changed at $1.2470 per pound.
Supply - The world's number of cattle as of January 1, 2020, rose +0.2% to 989.634 million head. As of January 1, 2020, the number of cattle on farms in India (the world's largest herd) rose +0.7% to 308.700 million head and on Brazilian farms (the world's second-largest herd) rose by +2.5% to 244.150 million head. As of January 1, 2020, the number of cattle and calves on U.S. farms fell by -0.1% yr/yr to 94.700 million head. The USDA reported that U.S. commercial production of beef in 2019 fell -1.0% yr/yr to 27.151 billion pounds.
Demand - The federally-inspected slaughter of cattle in the U.S., a measure of cattle consumption, rose by +1.7% yr/yr to 33.069 million head in 2019, up from the 5-decade low of 28.296 million head in 2015.
Trade - U.S. imports of live cattle in 2019 rose by +5.1% yr/yr to 1.997 million head. U.S. exports of live cattle in 2019 rose +26.7% yr/yr to 393,400 head, the highest level since 2000's level of 481,200 head. U.S. imports of beef in 2019 rose +2.1% to 3.061 billion pounds. U.S. exports of beef in 2019 fell -4.3% yr/yr to 3.024 billion pounds.
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