Market Fundamentals Can Affect The Live Cattle Futures?
In free market economies, supply and demand is the
primary enabler for price movement. Any outside forces that affect supply and demand eventually affect prices. When you are
considering a trade in the live cattle market some of the basic fundamentals that you should consider are:
1. Weather Weather can be a major factor in cattle prices. Hot weather can usually results in cattle not gaining
normal weight as they tend to eat less. Extremely hot weather can result in significant death loss of calves, yearlings, and
finished cattle. Also, extremely cold weather causes cattle to become stressed and burn more energy to stay warm, which means less weight gain. Less weight gain equal less meat and lower prices.
2. Disease Bovine spongiform encephalopathy (BSE) also know as mad cow disease was first identified in 1986. The number of animals
infected has been small and isolated, but the publicity about even one case can send prices sharply lower because of worries
about the effect on domestic consumption and import restrictions imposed by other nations.3. USDA Reports The most important report for cattle futures is The Cattle on Feed Report.
This report contains the monthly total number of cattle and calves on feed, placements and marketings.
4. Economy Beef demand and cattle prices are directly impact by consumers’
incomes. The current financial crisis may reduce those incomes and therefore cattle prices. The last two recessions in the
U.S. were very mild. This recession may be more severe, more like the recessions of 1974 and 1975 and again in 1981 and 1982
when real GDP dropped near three percent. A drop of that magnitude this time could have a $4.50 to $5.00 per hundredweight
negative impact on live cattle prices, not as much as prices have
These are just some of the basic fundamentals to keep in mind when you
are considering a trade in the live cattle market. Therefore, before opening up a commodity account to trade live cattle you
should consult with a licensed commodity broker that follows the live cattle market to discuss investment strategies.