According to the U.S. Department of Agriculture, in 2018, cattle sales accounted for $67.1 billion in revenue and 18 percent of the total American ag market. Given this exceedingly large industrial footprint, cattle futures are attractive instruments for speculators and hedgers alike.
Live vs. Feeder Cattle
When it comes to trading cattle futures, there are several key distinctions to be aware of. The Chicago Mercantile Exchange (CME) lists two cattle-specific contracts. Here’s a quick look at the underlying asset of each:
- Live cattle: Until new calves reach a designated weight between 600-800 pounds, they are considered to be “live cattle.” Live cattle are typically bred in the summer, with calving season in the spring. This timing aims to take advantage of beneficial weather patterns and optimal grazing conditions.
- Feeder cattle: Once calves mature to around eight months of age, they are weaned from their mothers and sent to feedlots. At the feedlot, the calves are vaccinated, tagged, and fed specialized diets. To boost weight gain, the calves are transitioned from a grass-based to a grain-dominated feed. When an ideal weight is reached, around 1,200 pounds, the cattle are prepared for slaughter.
In the U.S., the cultivation and exportation of beef is big business. Annual reports from the U.S. Meat Export Federation (USMEF) suggest that aggregate beef exports exceed 1.25 million metric tons. This is a massive figure and one that is worth upwards of $7 billion to producers and marketers.
The cattle and beef industry is an inherently risky business. Unforeseen market disruptions, such as inclement weather, disease, or international trade conflicts, can swiftly displace relative levels of supply and demand. With such large amounts of capital at stake, the CME’s cattle futures lineup offers producers an ideal means of hedging risk and preserving market share.
Contract Specifications for Cattle Futures
Although available for trade electronically on the CME Globex, cattle are unique from other asset classes. Before ever buying or selling these contracts, it is important to be aware of the specifications :
Live Cattle
| Symbol | LE |
| Contract Unit | 40,000 pounds |
| Minimum Tick Value | 0.00025 per pound = $10.00 |
| Limits | $0.030 per pound to $0.045 per pound |
| Contract Listing | Nine months in the even monthly cycle: February, April, June, August, October, December |
| Settlement | Physical delivery |
Feeder Cattle
| Symbol | GF |
| Contract Unit | 50,000 pounds |
| Minimum Tick Value | 0.00025 per pound = $12.50 |
| Limits | $0.045 per pound to $0.0675 per pound |
| Contract Listing | Eight months at a time: January, March, April, May, August, September, October, November |
| Settlement | Cash settled |
Among the key attributes of cattle futures to be aware of are the distinct trading times.
Products such as the E-mini S&P 500, gold, and West Texas Intermediate (WTI) crude oil are available on a near 24/5 basis, but this is not the case with cattle. Here is a synopsis of when you can trade live and feeder cattle on the CME Globex:
Live Cattle
| Daily Open | Monday-Friday, 8:30 a.m. CST |
| Daily Close | Monday-Friday, 1:05 p.m. CST |
Feeder Cattle
| Daily Open | Monday-Friday, 8:30 a.m. CST |
| Daily Close | Monday-Friday, 1:05 p.m. CST |
Capitalize on the Potential of Live and Feeder Cattle
To learn more about the exciting world of cattle futures, look no further than the market pros at Daniels Trading. With decades of experience and access to cutting-edge technology, the Daniels team is ready to help you achieve your financial objectives. Whether you’re a producer looking to hedge risk or a retail trader searching for market share, schedule your one-on-one consultation today.
