Risk Warning: Your Capital is at Risk.
In this guide to trading live cattle, we’ll explain how and where you can trade this popular commodity with a list of regulated brokers that are available in your country. We also discuss why some traders choose to trade cattle and what experts say about trading it.
In a hurry? If you want to get started trading live cattle, here are brokers available in to consider:
Disclaimer: Availability subject to regulations.
Between 74-89% of retail investor accounts lose money when trading CFDs.
Contents
How to Trade Live Cattle
Traders have several ways to get exposure to live cattle. Here is a comparison of some of the trading methods:
| Method of Investing | Complexity Rating (1 = easy, 5 = hard) | Expiration Dates? | Mgmt. Costs? | Leverage? | Regulated Exchange? |
|---|---|---|---|---|---|
| Live Cattle Futures | 5 | ✅ | ❌ | ✅ | ✅ |
| Live Cattle Options | 5 | ✅ | ❌ | ✅ | ✅ |
| Live Cattle ETFs (ETNs) | 2 | ❌ | ✅ | ❌ | ✅ |
| Live Cattle CFDs | 3 | ❌ | ❌ | ✅ | ✅ |
Live Cattle Futures
The Chicago Mercantile Exchange (CME) offers a futures contract that settles into 40,000 pounds (18 metric tons) of live cattle.
The contract trades globally on the CME Globex electronic trading platform and has various expiration months.
Futures are a derivative instrument through which traders make leveraged bets on commodity prices. If prices decline, traders must deposit additional margin in order to maintain their positions. At expiration, live cattle contracts are settled by physical delivery.
Trading futures requires a high level of sophistication since factors such as storage costs and interest rates affect pricing.
Live Cattle Options on Futures
The CME offers an options contract on live cattle futures.
Options are also a derivative instrument that employs leverage to trade in commodities. As with futures, options have an expiration date. However, options also have a strike price, which is the price above which the option finishes in the money. Options buyers pay a price known as a premium to purchase contracts.
An options bet succeeds only if the price of live cattle futures rises above the strike price by an amount greater than the premium paid for the contract. Therefore, options traders must be right about the size and timing of the move in live cattle futures to profit from their trades.
Live Cattle ETFs
These financial instruments trade as shares on exchanges in the same way that stocks do.
While there is no ETF for trading live cattle specifically, there are three ETFs for trading livestock in general:
| iPath Bloomberg Livestock Total Return | E-TRACS UBS Bloomberg Livestock Commodity Total Return | iPath Pure Beta Livestock ETN |
|---|---|---|
Shares of Live Cattle Companies
There is no adequate way to gain exposure to live cattle prices through the equity market. Most ranches that raise cattle are privately owned. Traders seeking exposure are better off looking to ETFs that invest in futures than to equities.
Contracts for Difference (CFDs)
One way to trade live cattle is through the use of a contract for difference (CFD) derivative instrument.
CFDs allow traders to speculate on the price of live cattle. The value of a CFD is the difference between the price of live cattle at the time of purchase and its current price.
Many regulated brokers worldwide offer CFDs on live cattle. Customers deposit funds with the broker, which serve as margin. The advantage of CFDs is that the trader can have exposure to live cattle prices without having to purchase shares, ETFs, futures, or options.
IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.
Where Can I Trade on Live Cattle?
Traders looking to speculate on cattle & other agricultural commodities can start their research with reviews of these regulated brokers available in .
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
Reasons to Trade Live Cattle
Some traders choose to trade live cattle for the following reasons:
- Bet on global growth
- Inflation hedge
- Portfolio diversification
Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.
Bet on Global Growth
Growth in the global economy might be the best reason to trade live cattle. As emerging economies expand, their appetite for animal proteins including beef is likely to continue to increase.
After the United States, China and Brazil now consume the second and third most beef globally. China, South Korea, and Russia comprise three of the top five global importers of beef. Trading live cattle can be a bet on continued solid growth from emerging market countries.
Inflation Hedge
Trading live cattle can be a way to hedge against the loss of purchasing power from inflation. Livestock is almost certain to become more expensive if the world economy starts to overheat.
Low interest rates from the Federal Reserve and other central banks have produced speculative bubbles in assets ranging from equities to high-yield debt to cryptocurrencies.
Yet food remains the most basic and fundamental necessity. Food commodity prices could see the largest increases if the economy experiences higher inflation. Live cattle prices could benefit from these conditions.
Portfolio Diversification
Trading live cattle might be a feasible way to diversify a portion of a portfolio out of stocks and bonds and into commodities.
Potential Risks of Trading Live Cattle
Traders should also consider the potential risks of trading in live cattle:
- A global economic slowdown could seriously limit the demand for beef.
- Trends toward healthier living are creating negative perceptions about beef consumption.
- Beef production is heavily energy-intensive. Environmental concerns and the green energy movement have created negative publicity for the beef industry.
- Bovine spongiform encephalopathy (BSE), also known as mad cow disease, has the potential to cripple demand for beef products.
Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.
