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About Live Cattle (LC)
Live Cattle is the term that applies to beef cattle of a weight
appropriate for slaughter. The production cycle for cattle goes
from calves born to a rancher to the cattle being sold to feedlots.
The Feeder Cattle are fed a diet of corn and other feeds until
the cattle are of appropriate weight to be brought to market.
The feedlot operators sell their fattened cattle to meat processors
who butcher and dress the meat for sale to meat wholesalers and
retailers. The bulk of the cattle ranching is done in the west
and south west, while the bulk of the feeding and slaughtering
is done in the mid west’s corn belt area.
The birth and maturity cycles of cattle are the major issues
that have to be considered when trading cattle futures. A heifer,
or female , is usually not ready for breeding until she is 14
to 18 months old. The gestation period for cattle is nine months.
A calf is weaned at six to eight months old. For the next six
to ten months, the cattle is allowed to forage and graze to maturity.
After the cattle have matured sufficiently, the steers and heifers
are sold to feedlots. During periods of herd expansion, the heifers
are usually retained more frequently to increase the available
breeding stock. Once the cattle are approximately 600 to 800 pounds,
they are considered Feeder Cattle, or lean cows. The feedlots
are in the business of fattening the feeders up to a market weight
of 1,050 to 1,200 pounds. Feedlots usually feed the cattle a diet
consisting of mainly corn, meals, and other grain products. The
price of grain is the major component in the cost of feeding cattle,
so the price of grain directly affects the demand for feeder cattle
and the future supply of beef, or Live Cattle.
Cattle population usually follow a cyclical change every 12 years
- known as the Cattle Cycle. Roughly seven of the twelve years
are herd expansions and five are herd reduction. Changes in herd
sizes are fairly gradual due to the gestation and feeding operations
in place. Feedlot operators are much more flexible in their operations,
so Feeder Cattle prices tend to be more volatile than Live Cattle
prices. The expansion phase of cattle herds generally coincides
with increasing beef prices and an optimistic future price outlook.
During expansion, heifers are held back to repopulate the herd,
so supply is restricted. The restricted supply tends to strengthen
prices. But after the herds are repopulated, and grazing land
becomes overburdened ranchers are forced to liquidate herds. As
more supply is brought to the market, prices tend to weaken encouraging
more inventory liquidation. This process feeds upon itself until
only minimal cattle are left and prices increase to ration the
available supply. There have been about seven Cattle Cycles since
1896.
The major demand for Live Cattle is as beef. Beef is what’s
for dinner At least that is what the American Beef Council would
like one to think. The major purchasers of Live Cattle are slaughter
houses or meat processing plants. These processors slaughter and
distribute the meat for consumption.
The bulk of United States produced beef is used domestically,
though the export market for United States Beef is increasing.
Demand for beef tends to increase when populations increase and
tends to increase with income levels. Demand for the better cuts
of meat, referred to as Choice Beef, has kept pace with population
increases, though rarely exceeding it. Beef demand is somewhat
elastic. When beef prices increase people tend to eat more pork,
poultry and pastas. Shifts in the publics tastes play an important
role in the Cattle Population Cycle.
The costs associated with feeding operations have the greatest
affect on dietary changes. As grain prices increase, the cost
to fatten cattle to market weights increase causing the cost of
beef to the consumer to likewise increase. Rising beef prices
tend to make poultry and pastas more attractive meal choices than
beef.
The recent currency turmoil in Asia could have dramatic ramifications
on the demand for Live and Feeder Cattle. Asia has accounted for
a lot of growth in the demand for Live Stock, and the recent currency
crisis could slow their economies and their demand for red meat.
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