In an October 3 Barchart article on the cattle and hog futures markets in Q3 and beyond, I concluded that:
Meat prices declined in Q3, which is no surprise as it is the beginning of the off-demand season. However, the sector’s double-digit percentage gain since the end of 2023 is a sign that production costs continue to support higher prices, and logistical issues could send them to higher highs in 2025. The long-term price trends remain favorable as the markets head into the weak winter season.
Grills are tucked away in storage as winter approaches, except for those burning at football tailgates. Meat prices tend to rally as the peak grilling season from late May through early September approaches. The winter is an excellent time to start watching cattle prices, as they will likely head for new record highs next spring and summer.
Live Cattle Consolidate- The Forward Curve is Bullish
Live cattle futures prices have been bullish since the 76.60 cents per pound April 2020 pandemic-inspired low.
The monthly chart shows that continuous live cattle futures reached a record high of $1.9205 per pound in September 2023. Over the past months, the price has consolidated between over $1.60 and under the $1.90 level.
The forward curve to April 2026 highlights the steady and elevated price expectations for the live cattle futures market.
Feeder Cattle Consolidation- A Slight Backwardation
Feeder cattle futures have followed the same bullish path since reaching a $1.03625 per pound low in April 2020.
The monthly continuous feeder cattle futures chart illustrates a record high of $2.67425 per pound in September 2023. Over the past year, the feeders have traded between $2.10 and $2.65 per pound.
The forward curve out to November 2025 shows a slight backwardation with falling deferred prices in January through May 2025. However, prices are higher than the November 2024 contract in August through October 2025, indicating that sentiment remains bullish for the feeder cattle futures market.
Cattle prices reflect higher production costs over the past years
The 2020 pandemic caused significant travails for the animal protein producers. While prices exploded at the butcher counters, production virtually stopped at meat packing and processing plants. Prices for producers plunged while they soared for consumers.
The tidal wave of central bank liquidity and tsunami of government stimulus ignited inflation, causing production prices to increase dramatically. Rising production expenses filtered through to cattle prices, which are not far below the all-time highs.
Buying on selloffs could be the optimal approach
Cattle futures are now in the offseason for demand during winter. The peak grilling season runs from late May through early September when the aroma of steaks, burgers, hot dogs, and other animal protein products fills the summer air. Prices tend to decline during fall and winter, only to recover in spring.
As the cattle markets move into the heart of winter, the potential for selloffs increases, which could be an opportunity for the 2025 peak grilling season that starts next May. Since futures tend to reflect seasonal strength or weakness in the preceding months, we could see higher prices in Q1 and early Q2 2025.
Technical support and resistance in the fat and feeder cattle futures markets
I expect cattle futures to remain elevated next year, and the odds favor new all-time highs for the beef futures markets.
Live cattle futures for delivery in June 2025 are around the $1.81 per pound level in November 2024.
The chart illustrates that technical support for the June 2025 live cattle futures is at the August 2024 $1.7025 low with technical resistance at the May 2024 $1.8830 high.
Support and resistance for feeder cattle for May 2025 delivery are at the September 2024 $2.2765 low and the June $2.66 per pound high, respectively.
Cattle futures are in the heart of the offseason, but the prices remain elevated. Any significant downside corrections over the coming weeks and months could be compelling buying opportunities as the trend since 2020 remains bullish for beef futures.
