Cattle numbers continue decline

USDA cattle inventory numbers were released mid-week, and the numbers were in line with estimates but friendly in the sense that they confirmed what was thought to be known but had yet to be revealed in the placement numbers of the monthly Cattle on Feed reports.

The cattle herd has shrunk and continues to shrink. All cattle and calves totaled 87.2 million head at the start of 2024, down 2% from a year earlier. The number of beef cows was also down 2% from last year at 28.2 million head. This is the fifth consecutive year that the number of beef cows has shrunk by an average of 2% and makes it the lowest beef cow inventory since 1961.

U.S. beef imports have increased along with reduced exports to offset some of the reduced herd. The USDA estimated that beef imports reached 3.71 billion lbs. last year, up 9.3% from the previous year.

June Live Cattle futures were up another $2.95/cwt this week, finishing at $181.80/cwt after rallying $4.530/cwt last week. Carcass weights declined sharply again with steer weights down another 9 lbs. (19 lbs. in two weeks) and heifers down 13 lbs. (18 lbs. in two weeks) due to the winter weather early in the year.

The fundamental and technical picture of the cattle market paints a bullish picture, but that was also the case in September of 2023 when the market pulled back 15-20% in both the live cattle and feeder futures before bottoming out in early December. The drop may have been a healthy pullback in a fundamentally bullish market that never lost its wings, and those previous highs no longer look so far out of reach. However, for the trader that held long positions through the drop in price, the “health” of that pullback is probably still being questioned.

Crude oil not impressed

The U.S. made it clear there will be retaliation in the Middle East after a U.S. base in Jordan was hit, killing three U.S. troops. To go along with that, 353,000 jobs were added to the U.S. economy last month versus the 185,000 expected.

Both headlines would support what had been a bullish looking crude move from the prior week, but March crude oil futures were down $6 on the week by midday Friday, trading around $72/brl, creating an outside reversal week lower if the price action were to hold through the close.