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CME update: cattle futures ramp up as investors take advantage of discounts

08 April 2020

US livestock futures surged on 7 April as steep discounts in futures prices lured investors to buy back in.

According to reporting from Reuters, live cattle futures rose up to their 4.5-cent expanded limit as the discounts and current cash markets encouraged investors to return to the market.

Feeder cattle also jumped to their normal trading day limits, as the sector overall saw support from rallies in the energy and equities markets.

This was a noted reversal from Monday, when live cattle futures sank to their daily trading limit as beef stocks remained robust as most of the US restaurant industry remains closed due to the pandemic.

CME most actively traded live cattle futures ended the day up their 4.5-cent limit at 84.800 cents per pound, while most actively traded feeder cattle futures settled up 4.5 cents at 113.800 cents a pound.

Brian Hoops, senior market analyst at Midwest Marketing Solutions, said the volatility of the recent days in livestock futures was being driven in part by technical trading.

On Monday, the cattle market was "margin-call type selling," Hoops said. "Now that has gone away, we’re seeing the market recover."

Hoops said he expected that live cattle futures could continue to rally in the coming days, as futures are still heavily discounted compared with the cash market.

"You have June futures trading at $80," Hoops said, noting: "That’s the largest discount we’ve ever seen this time of year, compared to the cash market."

Trading limits for feeder cattle will be 6.75 cents on Wednesday, the CME Group said.

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