Live Cattle futures Trading High on USDA Forecast – 02/18/2022

Cattle futures prices are trading $8.00 premium to the USDA’s February forecast for finished steers through the end of 2022. The accompanying scatter studies display the historic high and low monthly average for Midwest finished steers as a function of domestic per capita beef supply. Note that the USDA forecast is high on the regression line.  

There is one major factor to consider in comparing the  current market state and the USDA forecast. The cattle slaughter assumed by USDA requires the market continue to exist on reducing the cattle herd. The January  cattle census found 16% of cattle were already in feedlots, which is the largest percentage in more than 40 years. The market may continue to overprice finished cattle and feeder cattle to entice ranchers to increase the number of heifers held for breeding and reverse the decline in the US cattle inventory.