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Aug Feeder Cattle.
- Thread starter Sandor54
- Start date
looks like cattle on feed bullish?
Honestly, I never look at the CoF report. As many interests as there are in the markets my view is that all the CoF information is priced in. However, reactions to the news can be traded but I am more of a longer term watcher of the market.
Having said that I will take a look at it later today or this weekend.
Having said that I will take a look at it later today or this weekend.
With lean hogs correcting on Friday I would be more inclined to think LC or feeders could follow some sort of topping fashion.
Seemed that COF was bullish, confirming packer profits, and lower desire of ranchers to keep animals for feed due to drought concerns and continued losses. Seems cash breakeven is 95 cents ? I wonder if this means, like in corn, that the market price will have to go higher to "buy" incentive to put more cattle on feed.
Seemed that COF was bullish, confirming packer profits, and lower desire of ranchers to keep animals for feed due to drought concerns and continued losses. Seems cash breakeven is 95 cents ? I wonder if this means, like in corn, that the market price will have to go higher to "buy" incentive to put more cattle on feed.
Quote from criveratrading:
With lean hogs correcting on Friday I would be more inclined to think LC or feeders could follow some sort of topping fashion.
Seemed that COF was bullish, confirming packer profits, and lower desire of ranchers to keep animals for feed due to drought concerns and continued losses. Seems cash breakeven is 95 cents ? I wonder if this means, like in corn, that the market price will have to go higher to "buy" incentive to put more cattle on feed.
The difference with cattle versus corn is that all cattle that are not going to be breeding stock are destined for a feedlot somewhere. It isn't a matter of buying the pen space as it is in corn with buying acres. It would most likely impact the feeder/fat spread. If supplies of feedlot cattle are expected to be lower but breakevens are still high then the logical remedy is to correct the feeder/fat spread.
Also the cattle cycle is fairly long and always in motion. Farmers can choose to grow soybeans over corn but cattlemen have only limited choices, expand, stay the same or contract-all are longer term decisions.
The cattle will always be on feed at some time it is just a question of where are they now and when will they come into the feedlot. Placements were down, in my opinion, because there are so few feedlot type cattle out there right now and prices are so out of line for the sector. It is summer and money is being lost so placements will be lower.
so the pureplay , to play this fundamental aberration where feeders are too expensive (as evidenced by low placements) but perhaps the demand side is improving ( grilling season, perception of finally opening up export markets again, better than expected marketings etc) is to :
short feeders
buy live
which is the spread you were mentioning all the time around yes?
a less directional play, per se, but one that needs to correct to either:
a) have live cattle rise to breakeven
b) have feeders cheapen up to the point where it makes sense to resume placements.
any inferences from the weight figures breakdowns that were detailed?
short feeders
buy live
which is the spread you were mentioning all the time around yes?
a less directional play, per se, but one that needs to correct to either:
a) have live cattle rise to breakeven
b) have feeders cheapen up to the point where it makes sense to resume placements.
any inferences from the weight figures breakdowns that were detailed?
Quote from criveratrading:
so the pureplay , to play this fundamental aberration where feeders are too expensive (as evidenced by low placements) but perhaps the demand side is improving ( grilling season, perception of finally opening up export markets again, better than expected marketings etc) is to :
short feeders
buy live
which is the spread you were mentioning all the time around yes?
a less directional play, per se, but one that needs to correct to either:
a) have live cattle rise to breakeven
b) have feeders cheapen up to the point where it makes sense to resume placements.
any inferences from the weight figures breakdowns that were detailed?
One trend I have seen is for order buyers to be calling with light weight calves. I have been saying the opposite-to buy heavy feeders 850# +. I haven't looked at the placement weights but I am betting that is what the picture looks like.
The surest way to correct the imbalance is for feeders to begin to move lower in relation to live cattle. This spread is the essence of the industry and right now it has many in the feeding sector wondering how they can buy feeder cattle. The thing I always tell cattle feeders though is that the spread will continue widening until it doesn't. I have tried guessing it's top before (last summer) and was way to early and this time around I am going to wait until I see that it has turned. That being said, I do see signs of a top in the spread.
Placements are just a percentage of last year and all cattle will eventually be placed. Sometimes when they are light calves and sometimes when they are much heavier. I think light feeder cattle are the most overvalued and are driving the market higher. If they top out heading into late summer then I think the spread could finally work it's way lower for a period of months.
Looks like the Feeder/Fat spread is correcting, today at least. Feeders are up 1 while Fats are up 1.85. This is the type of action we need to see more of to correct the spread.
This is also the reason I like to trade this spread rather than make outright trades. We know the fundamentals of the spread we just need market triggers to have it begin moving in the direction needed to keep everything in somewhat of a balance.
This is also the reason I like to trade this spread rather than make outright trades. We know the fundamentals of the spread we just need market triggers to have it begin moving in the direction needed to keep everything in somewhat of a balance.
looks like feeders now plus 2 for the august position and fats the same.
on another note, oh so very tempted to buy a bull call spread on corn. question is: have fundamentals changed to the point where we will get 160-170 yields and ballooning ending stocks to quench demand ? seems weather and hence pollination are near perfect . but july and august might have some surprises. technically this is sort of where we should stop , no?
on another note, oh so very tempted to buy a bull call spread on corn. question is: have fundamentals changed to the point where we will get 160-170 yields and ballooning ending stocks to quench demand ? seems weather and hence pollination are near perfect . but july and august might have some surprises. technically this is sort of where we should stop , no?