Sort & Cull

If you've been paying close attention to the feeder cattle complex over the last three to four months, you've noticed the incredible rally the market has accomplished. You've also noted another very important point: The feeder cattle complex specifically is seeing the effects of a wider daily trading limit.

Each year, toward the later part of May and taking full effect by the beginning of June, CME announces their resetting of the daily price limits for both the live cattle and feeder cattle contracts. This past June, the daily price limit for live cattle contracts went from $6.75 per hundred weight (cwt), to a new daily limit of $7.50/cwt, and with a new expanded limit of $11.25/cwt. And likewise, the feeder cattle contracts saw its daily limit of $8.25/cwt change to the new daily limit of $9.25/cwt and with an expanded daily limit of $13.75/cwt.

If you think back to five or so years ago, it was common to see the contracts trade up or down $1.00 or so, but only on days where something noteworthy transpired did you see the contract trade more than $3.00 one way or another. However, in today's environment, it seems the increased daily trading limits have had an inflation effect on the market. Seeing a $1.00-move five years ago was normal, but today, the market sees a daily movement of $3.00 to $4.00 with the same $1.00 regard.

Take Monday's, Oct. 6, 2025, close for example. The spot December live cattle contract closed $2.17 higher at $236.67, and the spot November feeder cattle contract closed $5.37 higher at $360.80.

Now if I were on the phone with someone and told them the feeder cattle contracts easily closed $5.00 higher, the first question that would echo back at me would logically be: What happened? What positively developed in the cattle complex to drive prices higher? And while the market did see midday boxed beef prices close slightly higher, you can't point to any other bullish development to justify the $5.00 advance.

I understand the market is trading at historic highs; and some added volatility naturally comes with these prices. At the same time, I personally believe the expansion of the daily trading limits has added another unnecessary level of volatility to the mix.

On Monday, Oct. 6, the market may have been able to close $5.00 higher without a major driving force, but remember, someday in the future, the market will likely tumble $5.00 lower without much of a reason.

ShayLe Stewart can be reached at ShayLe.Stewart@dtn.com

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