Trading Post

October 2, 2013 11:55 am

Record cattle prices suggest caution

Swift retracement has followed previous sharp moves higher

The Chicago Mercantile Exchange this week warned that a prolonged government shutdown could impact settlement procedures for some of its livestock futures products – just one more example of how Washington’s gridlock may affect markets.

But will it stop the stampede in beef prices?

Cattle and feeder cattle futures sit just shy of, and at record highs, respectively, as tight supplies continue to dominate the market.

Recent droughts in the US left the cattle herd at the start of the year at its smallest since 1952.

The latest rally in prices comes after the US Department of Agriculture last month revealed the nation’s feedlots added the least amount of cattle to herds in August since the method of collating such data began in 1996, according to Bloomberg.

This comes as exports of beef continue to expand and domestic consumption holds up as the economy improves.

But for all the supportive fundamentals, bullish traders may be advised some feeder cattle caution.

Those of a technical bent may notice how the last few times the price rose sharply above its 50-day moving average it left the market looking overstretched and contributed to a relatively swift retracement.

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