Oct Live Cattle Chart

This is the October live cattle chart –  showing the breakout following the recent friendly cattle on feed report. We broke out of the recent trading range we had been consolidating in and found little to no follow through after Monday’s explosive rally. As you can see by the chart, we have broken back down through previous resistance, which turned into support and now we have broken through our longer term support line.

 

Fundamentals:

From a macro perspective, I don’t see much having changed on the Covid front. The Afghanistan issue will be something that will continue to be monitored as the Taliban takes control. I will say the macro markets seem “content” right now with these two news stories as they are.

 

Risk Management:

I still like getting protection on to cover downside break evens or lock in profits. My opinion hasn’t changed that we will see a strong basis for cattle marketed April-June, so I like straight hedging these cattle. If a producer wants to get a floor established and leave their upside a little more open, I would buy a put and sell a call. Once this position is on, if we see a decent sized correction, we can always look into selling a put on the bottom side to further cheapen this up.

 

On the corn side of things, we are currently trading down 15 cents today and around 528. I still think 525 is a good spot for cattle feeders to get some corn locked in to manage their cost of gain, but with the recent rains across the corn belt and the hurricane damage to exporters in the Gulf, it sure seems likely to me that we could see corn go test the 200 day moving average at 501. Below 500 Dec futures, there is a gap open at 477’4 which would be a target. Personally, I don’t know that I would wait around for that gap to get filled if we saw corn down around 500 Dec. I feel like that would be a great spot to get corn ownership on to lock that aspect of your cost of gain in.

 

Call with any questions or to get some values on any of the strategies discussed.

 

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