In The Cattle Markets
Ramifications of the recent ‘Cattle On Feed’ report.
June 3, 2025
by Matthew Diersen, South Dakota State University
The Cattle on Feed report was released after the markets closed Friday, May 23. The trade was expecting a smaller on-feed total compared to last year, with both placements and marketings down a similar percentage to a year ago.
Slaughter volume was lower last month, suggesting smaller marketings expectations were warranted. Feeder-cattle auction volume was sharply higher last month, but direct volumes were sharply lower. The volume of feeder cattle reflected in the Feeder Cattle Index was also lower during April compared to last year.
Actual placements came in slightly above trade expectations. Kansas feedlots stood out as having higher placements compared to other states, while those in Texas had lower placements. There was no strong pattern in placement weights.
The heifer mix in feeder sales volume was down a little in April. When coupled with low winter hay use, it may indicate some producers are trying to hold back some heifers.
Hedging between now and the end of August could have greater basis risk as cash prices and the nearby futures can diverge.
Imports from Mexico (open during April) have again been suspended because of New World screwworm concerns. Both factors further pressure tight feeder-cattle supplies.
Actual marketings in April were higher than trade expectations. Nebraska feedlots had more marketings compared to other states, while those in Kansas had fewer marketings. The total number on feed, 11.4 million head, was in line with trade expectations. Seasonally, the total on feed is very consistent with smaller volumes heading into the late summer months.
Seasonally, June and July are typically lower-volume months for placements. This time of year may be challenging for hedging feeder cattle for both buyers and sellers. Feeder-cattle futures and options are cash settled. Without any physical delivery the last trade date is the same for both contracts.
For example, the May futures and options expired last Thursday, the last non-holiday Thursday of the month not preceded by any holiday disruptions. The next listed contract is August, with its last trading day at the end of that month. This is a wide time span between contract months. As a result, any hedging between now and the end of August could have greater basis risk as cash prices and the nearby futures can diverge. The other time of year with a wide span would be between the November contract, with the last trade date before Thanksgiving, and the January contract.
Note that Livestock Risk Protection settles to specific end dates and does not present the same type of basis risk. If the CME Group added serial or short-dated options for feeder cattle, it would potentially mitigate some of that disparity.
Editor’s note: Matthew Diersen is a risk and business management specialist in the Ness School of Management & Economics, South Dakota State University. Article reprinted with permission from the Livestock Marketing Information Center.
Angus Beef Bulletin EXTRA, Vol. 17, No. 6-A
Topics: Industry News , Marketing , News
Publication: Angus Beef Bulletin
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