Looking to the Futures

Live cattle dipped for a second straight day on Thursday on governmental regulations and technical pressures. Live cattle futures for October, /LEV25, settled at 236.95/cwt, down 1.375 from previous settlement. 
 

The New World Screwworm (NWS) has been the talk of the international cattle trade community for almost a year, November 22, 2024. Then, Mexico notified the US it had found a cow, in southern Mexico, infected with NWS. The US responded by restricting the importation of animal commodities. This lasted for two months and the US reopened animal imports with additional inspection protocols. In May, the US once again restricted animal imports along the southern boarder as eradication efforts in Mexico had failed to stop the northward migration of NWS, infections were detected 700 miles from the US border. In June, Secretary Rollins announced the launch of a $8.5 million NWS dispersal facility in Texas and reopened trade. Finally, in July, Secretary Rollins again closed the southern boarder to animal imports after NWS was detected 370 mils south of the US border.
 

Their move north could have a detrimental impact on an already small cattle population in the US. The USDA is currently working with international and domestic partners to prevent this spread. In a study by USDA a previous screwworm infestation cost the Texas economy $329.6M in losses. When adjusted for inflation and applied to today’s livestock numbers, the Texas economy could lose $1.8B. 
 

However, at this rate, it’s more of a matter of when over if the NWS will start appearing in the US herds. Beyond the extended bullish trend in cattle prices, indecisiveness of regulations may eventually catch up with cattle prices as the current administration navigates this invasive parasite. An NWS infection has already been detected in a Maryland resident after they returned from a trip to El Salvador. They have recovered and it’s been determined there have been no transmissions to other people or animals. 
 

The NWS is a fly whose eggs are the parasite. The fly lays eggs in live flesh which, is in the 100s, and after hatching the maggots consume the flesh. Bacterial infections begin to appear, and if left untreated can kill the infected host within 7 to 14 days. The US government previously eradicated NWS in the US in the 1970s by releasing sterile NWS males, which left eggs unfertilized. 
 

With the threat of NWS, cattle prices are also supported by a low US herd population. The USDA Livestock, Dairy, and Poultry outlook for August 2025 shows total cattle and calves at 94.2 million head, down 1.3% from July 2023, beef cows were at 28.65 million head down 1.2% from 2023. Beef production for 2025 is estimated to be at 25.926 billion lbs., down 4% YoY, and 2026 beef production is forecasted at 25.47 billion lbs. The report references the reason for this change from “fewer feeder cattle available for placement due to increased heifer retention for breeding, as well as incorporating the initial calf crop estimate for 2025.”
 

USDA Wholesale Boxed Beef prices were lower Thursday morning with the choice/select spread at $26.44. Choice boxed was down $1.80 to $414.21 and select boxed was up $0.04 to $387.77. Estimated cattle slaughter for Thursday was at 121,000 head, and 363,000 head week to date. Week to date slaughter is down 17,307 head from this same period last year.

Live cattle futures have continued to support a bullish trend and is well above the 50- and 200-day simple moving averages. The 50-day SMA is at 226.552, and the 200-day SMA is at 207.737.
 

The 14-day RSI is at 58.5617% just as it retreats from the 70% overbought threshold. An interesting pattern has begun to form on RSI which may indicate a reversal. At the end of July, RSI peaked above the overbought threshold, then retreated to 50% and started approaching the overbought threshold again. Live cattle reached another all-time high on August 27th, but RSI remained below the overbought threshold. This is a possible divergence, which can only be confirmed with time and might lead to a reversal.
 

The directional movement index is also pointing to possible weakness in price. ADX remains high but appears to be shifting to the downside. The positive movement index is still elevated but moving lower and the negative movement index is moving up.

Major economic reports, trading events, and news items that could potentially impact specific futures markets:

Average Workweek 8:30 AM ET

Average Hourly Earnings 8:30 AM ET

Non-Farm Payrolls 8:30 AM ET

Non-Farm Private Payrolls 8:30 AM ET

Unemployment Rate 8:30 AM ET

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