Cattle Futures Rally on Slowing Supply: What's Behind the Price Surge?

Livestock markets showed significant momentum this week, with live cattle futures climbing $1.85 to $2.40 as of Friday’s close, while February contracts surged $1.25 higher for the entire week. The bullish movement reflected tight supply dynamics revealed in this week’s USDA Cattle on Feed report, which became the key driver of buying interest across the sector.

The most telling sign came from November placement numbers: cattle moved to feedlots hit 1.595 million head—missing market expectations and representing an 11.19% year-over-year decline. Marketings similarly disappointed at 1.521 million head, down 11.83% compared to 2024 levels. By December 1, total cattle on feed stood at 11.727 million head, a 2.13% drop from the prior year and below the 1.6% decline estimates. These figures underscore a tightening herd that could support prices going forward, particularly relevant given that commercial cattle typically spend 120-150 days in feedlots before processing—a timeline that makes today’s placement weakness signal future supply constraints.

Feeder Cattle Catch Up With Strong Weekly Gains

The feeder cattle complex benefited from the same supply story, with January contracts posting $6.50 gains across the week. Friday’s action saw feeder futures jump $4 to $5.325, while the CME feeder cattle index (December 17 reading) climbed 26 cents to $350.05. This strength in younger animal prices reflects feedlot operators’ concerns about tightening availability and their willingness to pay up for replacement cattle.

Trader positioning data corroborated the bullish shift. Speculative accounts added 6,082 contracts to their net long positions in live cattle futures and options, bringing holdings to 88,290 contracts as of December 9. Similarly, managed money investors boosted feeder cattle positions by 843 contracts, reaching a net long of 14,261 contracts over the same period.

Boxed Beef Prices Strengthen Amid Retail Demand

USDA Wholesale Boxed Beef quotations moved higher Friday afternoon, with Choice cutting jumping $4.35 to $361.63 per hundredweight and Select rising $2.05 to $346.02. The Choice/Select spread widened to $15.61, suggesting retailers maintained steady premium demand for higher-quality cuts. Federally inspected cattle slaughter came in at 587,000 head for the week, representing 9,000 head below the prior week and roughly 28,600 head below year-ago levels.

Cash Market Stays Under Pressure Despite Futures Strength

Despite the rally in futures, the spot market showed softer undertones. Cash cattle traded at $228 across the country, while dressed beef held in the $356-358 range. This divergence between futures strength and softer cash prices typically signals that the supply constraints are anticipated to tighten further into the near term, which is why forward-month contracts commanded such premium valuations.

The week’s price action sets up an interesting dynamic heading forward: declining placement numbers suggest the current cattle herd is shrinking, which over the typical 120+ day feeding period could eventually support higher slaughter cattle prices. However, near-term cash weakness hints that the market is still managing current supply, even as future scarcity concerns drive the speculative crowd to load up on long positions.