In the US, cattle are allowed to mature a little on the ranch and then sold to feedlots for feeding up. At this stage they are feeder cattle, and futures are available on them. Then the feed lot sells them to a packer for beef production, and at this stage they are called live cattle. The US cattle herd shrank dramatically in the recession, and with demand now starting to recover, supply is short. Supply shortages are amplified in this market by the fact that ranchers are likely to hold back more cattle for breeding when the cattle cycle appears to be turning up, further reducing supply. Also, a cold US winter has meant fewer and thinner cattle.

The price broke through 95 yesterday, which looks like the resistance level. I bought it today as the price pulled back ahead of the pit trading session. With hindsight I bought too early, as the price quickly fell back to test the breakout level — perhaps I should have waited for the open. However, my stop was deliberately wide enough to accommodate a re-test of the breakout, so all that has been lost is upside leverage. The occasions when this happens are almost as painful as the times when the market runs away from you to the upside; with that in mind, I think I did the right thing by buying a decent pullback with a stop wide enough to accommodate a re-test of the breakout.