Livestock

Livestock trading is popular with investors looking to bet on global economic growth, hedge against inflation, and build a diverse portfolio. This guide to live trading cattle lists the best brokers, platforms, and apps. Our team also uncover trading hours, investment vehicles, plus the key influences on meat and livestock prices.

How To Trade Livestock

Livestock trading refers to the buying and selling of animals such as cattle, sheep, and pigs.

Futures are the best-known trading vehicle, providing users with a fixed price for livestock at a set date. Futures contracts were introduced to help protect farmers and merchants from unpredictable factors, such as disease. Traders can also buy and sell futures to speculate on cattle prices, taking a short position if they believe the market will decline, for example.

Other livestock trading vehicles include options, CFDs and ETFs:

• Options are similar to futures, except the buyer has no obligation to buy X metric tonnes of cattle on Y date. For this flexibility, they pay a premium.
• CFDs are a popular derivative that allows traders to speculate on rising or falling prices, with the contract value the difference between the purchase and sale price. CFDs on livestock are offered by many top brokers regulated in the UK.
• ETFs are a basket of assets that typically track an index or sector, such as livestock, and can be traded on exchanges like shares. Popular livestock ETFs include the iPath Series B Bloomberg Livestock Subindex Total Return ETN and E-TRACS UBS Bloomberg Livestock Commodity Total Return.

Note, trading stocks directly in a livestock company is difficult as most are privately owned businesses.

The Chicago Mercantile Exchange (CME) is the key global exchange for livestock trading and offers live cattle futures, lean hog futures, feeder cattle futures, and pork cutout futures. In the UK, trading livestock is also available through local exchanges, including the London Livestock Futures Exchange, which offers futures on live cattle, feeder cattle, and lean hogs.

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History Of Livestock Trading

Livestock has been an integral part of civilisation for thousands of years. Historically, livestock was traded through barter systems, with animals serving as a form of currency. As trade and commerce evolved, livestock trading became more sophisticated, with specialised markets emerging in various regions.

For example, in England during the Middle Ages, livestock markets were held in towns and cities throughout the country, with buyers and sellers coming from far and wide to participate.

In the early 2000s, livestock trading saw significant growth thanks to advances in technology and the globalisation of markets. Global meat production increased from 248 million tonnes in 2000 to 327 million tonnes in 2019, with beef, pork, and poultry accounting for the majority of this growth.

During this time, electronic trading platforms also emerged, allowing traders to buy and sell livestock futures and options contracts online. In the UK, the London Livestock Futures Exchange was established in 2002, providing a central marketplace for livestock futures trading. It reported a total trading volume of over 2.7 million contracts in 2020, despite the challenges posed by the COVID-19 pandemic.

In the UK, the livestock industry contributes an estimated £10 billion to the economy each year. Trading in livestock futures, options and CFDs continues to be popular, with online platforms providing easy access to these markets for retail investors.

However, concerns about animal welfare and environmental sustainability are increasingly influencing the industry, with many traders looking for ways to invest in more ethical and sustainable livestock production practices.

Factors That Influence Livestock Prices

Multiple factors can impact livestock trading prices:

• Supply and demand: The balance of supply and demand for meat products is a key driver of livestock prices. When there is a shortage of meat products due to disease outbreaks or weather-related supply disruptions, prices tend to rise, and vice versa.
• Consumer trends and preferences: Changes in consumer preferences towards different types of meat or dietary choices can also impact livestock prices. For example, if there is a growing trend towards plant-based diets or alternative protein sources, demand for meat products may decrease, putting downward pressure on prices.
• Global growth: Rising economic prosperity, particularly in emerging markets, can lead to increasing demand for meat and livestock, pushing up prices. Currently, the US, China and Brazil consume the most meat globally.
• Weather conditions: Severe weather conditions such as drought, flooding or extreme temperatures can impact the health and productivity of livestock, affecting supply and prices. Weather events can also impact the transportation of livestock to market, which can create supply chain disruptions and price fluctuations.
• Disease outbreaks: Outbreaks of diseases such as African swine fever, bird flu, or foot and mouth disease can significantly impact livestock health and supply. In some cases, entire herds may need to be culled, leading to supply shortages and price increases.
• Regulatory interventions: Government announcements that impact the energy-intensive processes required to raise meat like cattle can hurt prices. In addition, actions taken by bodies like the UK Department for Environment, Food and Rural Affairs (DEFRA) and the Agriculture and Horticulture Development Board (AHDB) can influence the stability and outlook of the local meat market.

Benefits Of Trading Livestock

One of the key factors that attract traders is the volatility of livestock prices. Prices can be influenced by a range of factors including weather patterns, disease outbreaks, consumer demand, and supply chain disruptions. These unpredictable factors can create large price swings, leading to the potential for both significant profits and losses.

Another factor that draws traders to livestock trading is liquidity. With livestock a fundamental component of the food industry, there is always demand for meat products, and traders can generally execute trades quickly and easily.

Trading livestock can also provide a way for investors to diversify their portfolios beyond traditional stocks and bonds. Additionally, some investors turn to meat and cattle to hedge against inflation, with livestock prices in the UK reaching record highs in late 2022 and early 2023.

Risks Of Trading Livestock

The same volatility that creates opportunities for decent returns can also lead to large losses. Livestock prices can also be influenced by a wide range of factors beyond the control of individual traders, such as weather, disease outbreaks, and government policies.

Cattle prices could also suffer if growth in emerging markets slows down. Then there is the fact that the meat industry has suffered a barrage of bad publicity for its resource-intensive farming processes, helping to push consumers towards alternative foods.

Comparing Brokers

When choosing livestock brokers in the UK, look for the following:

• Products: Online brokers may offer different livestock trading vehicles, from CFDs to futures, options and ETFs. Make sure the firm you sign up with offers the investment product that aligns with your livestock trading strategy.
• Fees: Top-rated brokers with livestock trading offer tight spreads and/or low commissions. Plus500, for example, offers live cattle futures on the Chicago Mercantile Exchange with a 0.1 spread and 1:10 leverage. Alternatively, Pepperstone offers CFDs on live hogs and live cattle with spreads of 12.4 and 12.3, respectively.
• Trading platform: Leading cattle brokers offer an intuitive platform with sophisticated technical and fundamental analysis tools. Fast execution speeds and a stable interface will also enhance the user experience. The most popular platforms are MetaTrader 4 and MetaTrader 5.
• Regulation: The best livestock brokers in the UK will hold a license with the Financial Conduct Authority (FCA). This body ensures registered firms offer various safeguarding measures, including negative balance protection for retail traders, clear risk warnings, and access to compensation should the brokerage go bankrupt.
• Research and education: Look for livestock brokers that provide educational materials, such as webinars, tutorials, and market analysis, to help you improve your trading skills and stay up-to-date with the latest trends in livestock trading.

Trading Hours

The trading schedule for livestock in the UK will vary depending on the exchange, instrument and broker.

With that said, livestock trading on the Chicago Mercantile Exchange typically runs from Monday to Friday: 8:30 AM – 1:05 PM CT. Most livestock brokers will reflect the opening hours of the respective exchange.

Bottom Line On Trading Livestock

Trading cattle and livestock online is a popular way to diversify portfolios, bet on the growth of emerging markets, and hedge against inflation. Investors can speculate on livestock prices through futures, options, CFDs, and ETFs. The best livestock brokers for UK traders will be regulated by the FCA and offer a reliable platform and app.

FAQ

Article Sources

Chicago Mercantile Exchange livestock futures and options

Food and Agriculture Organisation livestock data

Plus500 live cattle trading conditions

Pepperstone livestock trading conditions