Cattle weight continues

November 3, 2015 09:15 AM

Chipotle Mexican Grill Inc. temporarily closed its stores in Oregon and Washington states after being informed its beef supply may have been tainted by e-coli. Over 20 human cases of e-coli are being investigated by health authorities. These cases may have been linked to six separate stores.

This news may have added a little pressure to live cattle futures yesterday. We cannot suggest this will hold a lasting bearish sway over the market though. We have had some very large e-coli based beef recalls in the past that did not affect long term beef demand. No official USDA notice for a recall from a specific source has been announced yet.

While cattle weights will continue to increase as they always do into late November, the drop in cattle numbers into Q4 typically offsets this increase. That is the reason why cattle prices typically rise. The tightest supplies hit in February/March. The second smallest period is early December.

Another story to note here is the renewed interest from funds in live cattle. They went from a strong 138,954 contracts net long in early 2014 to only 269 contracts net long two weeks ago. That was a record low net long position. Even if they regain 1/4 of that sell-off we could see a strong futures rally.

Page 1 of 2
About the Author

Rich Nelson is Director of Research at Allendale, Inc. in McHenry, IL. Allendale is registered with the CFTC and NFA and is a member of the NIBA.