‘Tis the season for stock-market traders to begin listening out for sleigh bells, hoping the year will end with a proverbial “Santa Claus rally.” Recent history suggests they may want to shift their focus from flying reindeer to cattle — fat and feeders alike.
A long position in April live cattle futures entered on Dec. 7 (or the following Monday if that date falls on a weekend, as it does this year) and exited 17 trading days later has turned a profit in each of the last 17 years, noted David Whitcomb, head of research at Peak Trading Research in Geneva, Switzerland.
“There is no other commodity trend on the planet that is as strong as this one,” Whitcomb told Pro Farmer.
Whitcomb found the trade produced an average gain of 4.02 cents, or $1,607.06 per contract, over the last 17 years. The biggest gain came in 2023, with a rally of 8.8 cents, while the smallest was a 0.27 cent rise in 2019 (see table below).
Feeder cattle futures have also enjoyed a strong holiday winning streak. Whitcomb found that May feeder cattle futures have risen in 10 of the past 10 years for the 29 trading sessions starting Dec. 9. That trade has produced an average gain of 6.2 cents, or $3,110 per contract, over the last 10 years, Whitcomb found.
Seasonal factors
That’s no guarantee either trade will work again in 2025, but the track record commands respect, serving as a testament to a combination of positive seasonal factors that take hold toward year-end.
Those factors include the holiday season, which tends to see demand for quality cuts of meat – prime rib and ribeye, for example – on the rise, noted Drew Martin, who raises cattle, corn, soybeans and wheat as part of a family farming operation near Girard, Kansas. Also, on the feedlot side, many of the fall-run cattle have moved by this time of year, he said, while “weather risk,” particularly in the northern U.S., can also limit movement.
On top of that, colder weather means cattle tend to eat more but not gain as quickly, potentially putting a damper on carcass weights and beef tonnage. And winter health issues can also have an effect on feeder-cattle supplies, Martin said, in a phone interview.
Indeed, “the market just feels tighter this time of year,” agreed Whitcomb.
Wall Street won’t be ignored
The stock market is also part of the story, Whitcomb said, noting that live cattle futures are the agricultural commodity with the strongest correlation to the S&P 500. November, December and January tend to be the strongest months for the stock market.
The connection between the stock market and cattle futures may simply be that when consumers feel good, “people tend to trade up for steak at the expense of chicken” and the like, Whitcomb said. Healthy 401Ks stir appetite for beef.
That may also, however, point to some dangers as 2025 comes to an end. While stocks are trading near all-time highs after a brief stumble tied to fears an AI-fueled surge may be overdone, there are signs less affluent consumers are turning away from the most expensive cuts. That said, overall beef demand has remained resilient despite record prices.
Potential pitfalls
Whitcomb said the biggest danger to the trade is political. Cattle futures have retreated sharply from all-time highs since mid-October after President Donald Trump began calling for lower beef prices. An increase in a beef import quota from Argentina and the lifting of a punitive tariff on Argentine beef imports followed. The next shoe to drop is likely to be a lifting of a ban on imports of Mexican feeder cattle that was implemented due to an outbreak of New World screwworm.
The other potential danger, given the strong correlation between equities and the cattle market, would be a stock-market stumble into year-end, he said.
Santa rally defined
That brings us back to the so-called Santa rally.
While the term is often casually thrown around to describe any late-year stock market rally, it actually refers to a specific phenomenon. It was popularized by the late Yale Hirsch, founder of the Stock Trader’s Almanac, in 1972, to describe the tendency of the S&P 500 to rally in the final five trading days of a calendar year and the first two trading days of the new year.
Hirsch viewed the phenomenon as an indicator rather than a tradable strategy. If Santa delivers, that tends to spell good news for stocks in the new year, while a negative stock-market return over that seven-day trading period indicates the opposite. He summed it up in a memorable and oft-quoted phrase: “If Santa Claus should fail to call, the bears may come to Broad and Wall,” a reference to the New York Stock Exchange situated at the intersection of Broad Street and Wall Street in Manhattan’s financial district.
It’s worth noting that the 17-year winning streak for live cattle identified by Whitcomb endured in years when Santa ultimately left investors’ stockings empty, including 2023 and 2024. The lack of a 2023 Santa rally was a false alarm, with stocks soaring in an AI-fueled super-rally in 2024. Last year’s no-show was followed by the April tariff tantrum, only for stocks to regain their footing, with the S&P 500 on track for another double-digit percentage gain in 2025.
But make no mistake, Whitcomb said, a significant downturn for stocks in December or beyond would undoubtedly be a major headwind for the cattle market.
“At the end of the day, stock market sentiment and consumer sentiment is going to move stocks, and it’s going to move commodities as well,” he said.