Feedlot Spreads aka Cattle Crush

stoic

stoic

As the charts show the Feedlot Spreads for the latter part of 2013 showed some recovery in the GFM from the unusual lows started in early 2011. It's very uncommon for the GFM to descend into the negative. Prior to the time shown in the charts above, the GFM from 1975 forward shows only the Mar. Apr. May and Aug. 1979 with negative GFM. The extreme being Apr. '79 @ -2.83 per cwt. The Apr. & May 1980 spreads also dipped briefly negative by only a few pennies. The two earlier negative GFM were due mostly from high Feeder Cattle prices or high Feeder with some pressure in corn. The majority of the negative GFM experienced since 2011 can clearly be attributed to the price of corn.

Each of the 2013 Feedlot Spreads shown in the report has 6 charts. One for each component of the spread, one showing the GFM in Dollars Per cwt. of Live Cattle, and one GFM Dollars Per Head for the 5-4-10 spread. Included with each set is also a chart the shows the "percent" change for each Feedlot Spread components. Each component starts at 0% for the same time frame covered in each Feedlot Spread.

Since the full report is to large to include here. (32 pages) PM me if you wish to receive the full 2013 Feedlot Spread Report in PDF. Your email address will NOT be retained or used for any other purpose.
 

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Quote from stoic:

As the charts show the Feedlot Spreads for the latter part of 2013 showed some recovery in the GFM from the unusual lows started in early 2011. It's very uncommon for the GFM to descend into the negative. Prior to the time shown in the charts above, the GFM from 1975 forward shows only the Mar. Apr. May and Aug. 1979 with negative GFM. The extreme being Apr. '79 @ -2.83 per cwt. The Apr. & May 1980 spreads also dipped briefly negative by only a few pennies. The two earlier negative GFM were due mostly from high Feeder Cattle prices or high Feeder with some pressure in corn. The majority of the negative GFM experienced since 2011 can clearly be attributed to the price of corn.

Each of the 2013 Feedlot Spreads shown in the report has 6 charts. One for each component of the spread, one showing the GFM in Dollars Per cwt. of Live Cattle, and one GFM Dollars Per Head for the 5-4-10 spread. Included with each set is also a chart the shows the "percent" change for each Feedlot Spread components. Each component starts at 0% for the same time frame covered in each Feedlot Spread.

Since the full report is to large to include here. (32 pages) PM me if you wish to receive the full 2013 Feedlot Spread Report in PDF. Your email address will NOT be retained or used for any other purpose.
More...

are you trading this spread?? Whats GFM stand for
 
Quote from cdcaveman:

are you trading this spread?? Whats GFM stand for
More...

GFM = Gross Feeding Margin. The full report details all the most common Cattle/Corn/Live Feedlot combinations. Also the calculations for both the 4-3-8 and 5-4-10 feedlot spread ratios in Dollars Per cwt. on Live Cattle and in Dollars Per Head. Included are charts for the monthly Cattle on Feed for 2009 - 2013, Feedlot Placements for 2009 - 2012, a chart for placements for 2013, and detailed charts for all 8 Feedlot spreads for 2013.
 
The question has been asked as to the potential PnL in trading the Feedlot Spread.

For this example I used the Mar. 2013 Feeders, May 2013 Corn, & Aug. 2013 Live Cattle. (see the attached)

On Jul. 6, 2013 we have the following settled prices:

Feeders @ 156.100 - Corn @ 701.25 - Live Cattle @ 129.700

At these prices the GFM = ($2.925) per cwt. or ($36.00) per head on the 5-4-10 spread.

Corn prices have moved sharply higher and caused the GFM to descend into the negative, an infrequent occurrence. The prudent feedlot operator is not going to operate at a loss, thus the demand for Feeders declines. As one can see in the "Percentage" chart shortly after the Corn prices spike higher the Feeders begin to decline and Live Cattle increases modestly. The trader anticipating that the GMF will move back to profitability for the feedlot operator takes the position of:

Short 5 MAR. Feeders @ 156.100, Short 4 MAY Corn @ 701.25, & Long AUG. Live Cattle @ 129.70

On Jul. 17th the settled price of the components of the spread are:

Feeders @ 145.100 - Corn @ 768.50 - Live Cattle @ 129.250

At the above prices the GFM = $ .138 per cwt. or $ 1.69 per head. The first day the GFM returns to positive. The PnL on each is:

Short Feeders + 11 $ per cwt. or $5,500 per contract, or a total of $27,500

Short Corn - 67.25 cents per bu. or ($3,362.50) per contract, or a total of ($13,450)

Long Live - $ 0.45 per cwt. or ($180) per contract, or a total of ($1,800)

Net PnL = $12,250
 

Attachments

Where are the attachments of the 12/24 post ?

Is there an exchange supported 5:4:10 spread or have to leg in ?
I only see the 5 C : 1 F : 2 LC spread on CME site

How much is the margin ?
 
running_bare said:
Where are the attachments of the 12/24 post ?

Is there an exchange supported 5:4:10 spread or have to leg in ?
I only see the 5 C : 1 F : 2 LC spread on CME site

How much is the margin ?
More...

The full report is to large for an attachment. PM me and the report (pdf) can be sent to you Email.
 
running_bare said:
Is there an exchange supported 5:4:10 spread or have to leg in ?
I only see the 5 C : 1 F : 2 LC spread on CME site
More...

The CME performance bonds page has been wrong for quite some time. This is the ratio you would be using while trading MINI-corns. However, more importantly, you still get credit if you put the right ratio, 1-1-2.
 
TraDaToR said:
This is the ratio you would be using while trading MINI-corns. However, more importantly, you still get credit if you put the right ratio, 1-1-2.
More...

What spread are you referring to with the ratio of 1-1-2??
 
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