Weekly Round-UP
- Cash Cattle Average last week ended at $124.75
- Choice boxed beef ended Friday afternoon at $324.83 with Select at $298.02
- Weights turning back lower and finally at same levels as our 5 year average
- Strong feeder cattle prices even though the drought worsens and cattle are pulled from grass early
- CoG still above $1 as corn rallied after last weeks grain report lowered corn yield by 5 bushel
- October Futures still testing that $1.30 level ahead of this weeks Cattle on Feed report
- August in delivery period, with the South trying to fight their horrendous basis levels
Source: CME Group
Follow the Money
I would assume that you all have heard about the events taking place in Afghanistan this past week. Between that disgrace and our President asking OPEC to increase production, Oil has taken a hit. What do traders think of all this global turmoil? Where do they want to place their bet? If I could call them all up, Id tell them CATTLE! Looks to me like I dont need to do that though. This commitment of traders report, from last week, shows that the Funds have been adding to their Long positions and exiting their shorts, while producers are looking at these prices and making their hedges accordingly. I cant blame them, and in fact, I have joined them. $140 April is a price we have not seen in a long time. My cattle are profitable at that level, by more than $100/hd. My hope is those hedges will burn me hard. I, and all of you, would like to see Managed Money stay long in Cattle and see some returns on that bet. We need them to take those positions, and for several years, they have not had a big reason to get long cattle. Cattle, in my very biased opinion, have the most bullish sentiment, at the moment, versus most other commodities. The questions to ask now are When do they exitor When is the high?
The Stock Market and Oil play a big role in a larger picture that affects the price of cattle. If we import oil, from lets say OPEC, and the price goes up, we have a better chance of exporting our higher end meats to other countries. And if the Stock Market is chugging right along, and people have money to spend, they are more likely to buy a ribeye than those cheaper chicken breasts. I know, that is meat sales, what does that have to do with Fat Cattle, two different things were told. I dont know if inflation is the sole reason we have boxes running higher. Exports have something to do with it. But a lot more of it has to do with the price of the mid-section, your steaks. Governments all over the world are throwing out money like candy at small town parades. Where will the consumers spend it? Last week, it was the hidden ball trick, buying fats at higher money early, then backing off as they come into this cattle on feed report week. I cant argue with that as weve had more than 4 straight months of cash cattle stuck between $120 and $125. But, is this the week cash breaks out? Managed money is betting on it happening. Cattle on feed early estimates certainly dont look bearish to me. If I had fats ready, as stated last week, I would lock the gates, sell the October futures here at $130, and ride out this report. Is cash going to rally $8 in the next half month? I hope so, but that is a big pill to swallow.
Also, full disclosure, I have only 20% of my spring cattle sold futures, the rest are protected with puts and LRP insurance. The funds are saying this has some room to run, and Im going to follow the money.
Looking to Trade or Hedge Cattle Please reach out and let’s chat…
Dan Gerhold
319.320.4774
Receive Relevant and Timely Cattle Market Reports that Matter!
Better yet, become a customer and get DAILY updates, fundamental, and technical, sent straight to your Inbox! Contact Us now to get started.
RISK DISCLAIMER: Trading in commodity interest products such as futures, options and otc swaps entails significant risks of loss which must be understood prior to trading and may not be appropriate for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time. The placement of contingent orders by you or broker, or trading advisor, such as a stop-lossor stop-limitorder, will not necessarily limit your losses to the intended amounts, since market conditions may make it impossible to execute such orders. Long options strategies could lose their entire premium plus transactional costs. Short options strategies entail unlimited risk of loss plus transactional costs. The information presented represents the opinion of Ag Optimus. Past performance of actual trades or strategies cited herein is not necessarily indicative of future performance. Futures prices factor in the seasonal aspects of supply and demand. This communication may cite historic data and should not be taken to mean certain trades can produce dramatic profits year in and year out. This information does not imply customers have or will experience profits based on seasonal trades or trade data. All information, communications, publications, and reports, including this specific material, used and distributed by Optimus Futures, LLC (“Optimus”) shall be construed as, or is in the nature of, a solicitation for entering into a derivatives transaction. Optimus does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71. This email may include information produced by third parties. Material not labelled Optimus Futures should be considered to be third-party, and is provided for informational purposes only. Third-party material is from sources believed to be reliable, but its accuracy is not guaranteed by Optimus Futures. Optimus Ag and Ag Optimus are registered dbas of Optimus Futures LLC [NFA ID 0481133] CONFIDENTIALITY NOTICE: Privileged/Confidential information may be contained in this message. If you are not the intended recipient, please notify the sender immediately and you must not use the message for any purpose nor disclose it to anyone. Communications on all mediums may be recorded.