August Live Cattle and the April COF Report – 05/21/2022

USDA reported cattle on feed May 1,2022 exceeded the year earlier level by 2% based on a 1% year over year decline in placements last month and a 2% reduction in marketings in April 2022.

Analysis of historical data suggest placements over the last eight months would project marketings during the May through November 2022 period up 2% on a year over year basis.

We have prepared a scatter study depicting August live cattle futures prices (the June August high) as a function of the domestic per capita beef  supply  during the July/September period. The point marked USDA is the intersection of the close on 05/18/2022 and the domestic beef supply estimate from the USDA’s May WASDE report. Note that the point is high on the regression line suggesting August live cattle prices will struggle into the summer. 

Bullish hazards to short cattle positions include inflation, which has impacted all farm commodities, and declining breeding cattle inventories which portends tighter cattle supplies this winter.