Live Cattle futures

This winter’s break in fat cattle prices could provide a buying opportunity in spring live cattle futures assuming this month’s beef supply/usage estimates from USDA. The accompanying scatter study plots the April/June average price for finished steers in the Midwest as a function of the per capita supply of beef available to the domestic market. The USDA’s March estimates result in a per capita supply of 21.4 pounds compared to 20.9 pounds in the spring of 2019.

In the period 1960 through 1990 it was necessary to include disposable income in cattle price models as consumers increased beef demand when incomes increased. But that relationship has broken down so we just use supply data.

Those bullish cattle will be counting on the recent beef supply-price relationship to be reestablished this spring with the passing of flu fears.