Looking to the Futures

Cattle futures have only had a couple of small pullbacks since hitting a low of 76.6 in April of 2020, all the while herd size in the U.S. has been on the decline. The first USDA report for 2026 showed a total of all cattle and calves in the U.S. to be 86.2 million, which is the smallest the herd size has been in the past 75 years. However, the report is only generated twice a year, once on the last Friday of January and again at the end of July. 

The declining herd size has not been an easy problem to solve and is seemingly becoming more difficult. New World Screw Worm or NWS has been causing havoc at the southern U.S. border, making it difficult for the United States to replenish the herd with cattle from South America. 

NWS has not been inside the U.S. since the 1960's but cases in northern Mexico are on the rise. The Animal and Plant Health Inspection service (APHIS) said on Tuesday that 120 active cases have been reported in Tamaulipas, Mexico which borders the most southern parts if Texas from Laredo to Port Isabel on the gulf coast. The APHIS also reported 1,416 active cases across Mexico. The USDA updates these numbers on their website every Tuesday and Thursday at 5 PM ET. In response to the recent cases in northern Mexico, Florida has imposed an import ban on Texas cattle coming from the southern counties of Zapata, Jim Hogg, Starr, Hidalgo, Webb and Brooks. 

On April 27th, the FDA issued an emergency use authorization for Negasunt powder, a topical powder used to prevent and treat NWS in multiple species. "The FDA has concluded that based on the scientific evidence available, it is reasonable to believe that Negasunt Powder may be effective for the prevention and treatment of NWS myiasis in cattle, swine, goats, sheep, horses, donkeys, domestic hybrid equids (e.g., mules), and captive wild, exotic, and zoo mammals, and that the known and potential benefits of the product outweigh its known and potential risks." said the FDA. 

The USDA, in collaboration with the U.S. Army Corps of Engineers, has initiated construction on a sterile fly facility in Texas. This facility is part of a $750 million project designed to replicate the successful strategy that eliminated NWS from the United States in the 1960s. The facility is projected to achieve operational capability by November 2027.  

The USDA has also invested $21 million to support modernization of Mexico's Metapa, MX facility, which is expected to be operational in the summer of 2026. 

The American Society for Microbiology reported that annual economic losses caused by NWS in South America and parts of the Caribbean are estimated to be around $3.6 billion. 

Today we have a 1-year, 1-day chart of the June Live Cattle (/LEM26) contracts. We can see the recent push to new highs, hitting 255.975 on Wednesday. Low of the chart came on November 25^th at 204.55. RSI is just above the 70-line, coming in at 71.1027, while implied volatility remains at just 16.77 percent. Current price is well above the 200 and 50-day SMA, while price just crossed above the 9 and 20-day SMA over the past week. The 20-day SMA crossed above the 9 this past Monday. 

9-Day SMA                      247.386

20-Day SMA                    247.532

50-Day SMA                    240.646

200-Day SMA                  233.629

14-Day RSI                       71.1027%

Implied Volatility              16.77%

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