Ticker: LC
Exchange: CME
Trading Hours: Regular Hours: 9:05 a.m.-1:00 p.m. (CST)
Contract Size: 40,000 pounds of 55% choice, 45% select grade live steers
Contract Months: Feb,Apr,Jun,Aug,Oct,Dec
Price Quote: 1 point = .01 cents per pound = $4.00
Tick Size: 0.025=$10.00
Last Trading Day:The last business day of the contract month.
Daily Price Limit: 1.5 cents/lb, 150 points, $600

40 Yr Seasonal Chart Long-Term Chart Cattle on Feed
Supply & Demand Tables Cold Storage Livestock Slaughter

Fundamental Overview:

What's the difference between live cattle and feeder cattle?

It depends upon the animal's place in the cattle cycle. Feeder cattle are weaned calves just sent to the feedlots (about 6-10 months old), and live cattle are cattle which have attained a desirable weight (850-1000 pounds for heifers, and 1000-1200 pounds for steers), to be sold to a packer.

The packer slaughters the cattle and sells the meat in carcass boxed form. Along with the carcass meat, the packer will also profit from the sale of what is referred to as the drop (hide, trimmed fat, variety meats, bones, blood, glands, etc.). The slaughtered cattle will be categorized by quality grade (prime, choice, good, etc.) and by yield grade (1 to 5, with the higher grades indicating a lower fraction of retail cuts). A 1000-pound choice yield grade 3 may produce a 650-pound carcass, which yields 495 pounds of salable beef. About 50 percent of the carcass is sold as steaks and roasts, 5 percent as stewing beef, and the remainder as hamburger.

What are its uses?

Beef is used almost exclusively for human consumption. Different grades of beef are bought by restaurants, schools, hospitals, and for household use. The remaining parts of the cattle are used in the production of leather, soaps, animal feed, camera film, and a variety of other products.

Where is it produced?

Although many countries throughout the world raise cattle, India raises more than any other. The US and Russia are also major producers of beef. In the US, the 7 major cattle producing states are Arizona, California, Colorado, Iowa, Kansas, Nebraska, and Texas.

Unlike most grains, cattle are usually consumed in the same country in which they were raised. The US imports a small amount of beef and exports very little. In addition, unlike grains, the production of beef in the US utilizes more land and creates more market value than the production of any other livestock or grain crop.

What determines the market price?

When dealing with beef prices, it is important to look at the supply and demand sides separately. The biggest factor on the supply side is the production costs. The production costs of fed cattle are the cost of feed (about 30 percent), and the price of feeder cattle (about 60 percent). Weather can also affect supply. Too much or too little rain can affect pasture conditions and in turn, the availability of feeder cattle.

The biggest factor of demand is personal income. An increase in personal income usually translates into an increased demand for high quality beef faster than most other foods. Other demand factors are price changes in alternative meats such as pork and chicken, population increases, and personal taste.

The major contracts for both live and feeder cattle are traded on the CME. The live cattle contract is based upon 40,000 pounds of USDA estimated yield grade 1, 2, 3, or 4 of choice quality live steers averageing between 1050 and 1200 pounds. Delivery months are February, April, June, August, October, and December. The price is quoted in cents per pound and the minimum price fluctuation is .025 cents per pound.

The feeder contract is based upon 50,000 pounds of feeder steers between 575 and 700 pounds, USDA graders determine all other specifications. The delivery months are January, March, April, May, August, October, and November. Prices are quoted in cents per pound with the minimum price fluctuation of .025 cents per pound.

Trading Notes

Some traders have a hard time trading the cattle markets due to the fact that the volatility can often change from day to day. A trader may find a few days in a row where it seems as though the market is as trending and tame as a grain market, while the next day he may find himself in a market that he feels is too risky for his taste.

Probably the most closely watched report by cattle traders is the cattle on feed report. The report is broken down into 3 sections or importance. The "number of cattle on feed" category and the amount "placed on feed" category represent the amount of cattle that will be available in the future. The "marketings" category, however, is a very short-term indicator of how much beef is ready to go to packers for slaughter.

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