Live cattle price

The main structural factor in live cattle is the cyclical movement of the US beef cow herd. The US beef cow herd moves in roughly a 10-year cycle. In the expansion phase, breeders increase the cow herd, which leads to more slaughter cattle after a 2–3 year lag and puts downward pressure on prices. In the liquidation phase, breeders cull cows, which lifts supply in the short term but creates shortages and higher prices over the medium term. According to the USDA Cattle Inventory report, the total US cattle herd is about ~87 million head, of which the beef cow herd is around ~28 million. It recently fell to a multi-decade low after drought-driven slaughter, and the industry is now in the rebuilding phase. The market is therefore highly sensitive to the semi-annual Cattle Inventory data: changes in the cow herd point to supply conditions 2–3 years ahead.

In the short term, the largest price driver is the feedlot margin, meaning the economics of fattening cattle in feedlots. A slaughter-ready steer needs roughly 3–4 kg of feed / 1 kg of liveweight in concentrate feed, mainly corn and soybean meal. Corn prices (CME Corn, ticker ZC) and soybean meal prices (Soybean Meal, ZM) are therefore priced directly into feedlot margins. Higher feed costs reduce feedlots’ willingness to buy feeder cattle and weigh on feedlot replenishment. Pasture conditions and drought in the US Plains region (Texas, Oklahoma, Kansas, Nebraska) are direct supply-shock factors. During prolonged drought, breeders are forced to send cows to slaughter earlier: more cattle in the short term, a smaller herd in the long term. The USDA publishes the monthly Cattle on Feed report on feedlot inventories at yards with capacity of 1,000+ head. It is one of the market’s main reference points.

Export demand is an important addition to the supply picture. Annual US beef production is about 12 Mt in carcass weight, of which exports are about 1.5 Mt, or close to 12% of output. The three largest destination markets are Japan, South Korea and Mexico. China has become a growing export destination after partial easing of market-access restrictions, but access remains politically sensitive and subject to periodic constraints, including BSE protocols, hormone-use rules and traceability requirements. The USDA Foreign Agricultural Service Livestock and Poultry: World Markets and Trade publication updates the global beef export and import balance. It also shows the competitive position of Brazil, the world’s largest beef exporter, Australia and the US. The market therefore watches not only domestic US supply but also herd trends in Brazil and Australia.