Please join me for a free grain webinar every Thursday at 3pm Central. We discuss supply, demand, weather, and the charts. https://attendee.gotowebinar.com/register/5708281090427952728?source=Lusk%20Reports
Commentary
We have been fielding many calls lately on how to protect Feeder and Live cattle prices into 2026. Funds continue to add positions on dips and in some cases during this impressive month on month rally across the livestock sector have built record high long positions. This comes as funds also sit with a sizable, short in the grain market specifically in corn and soymeal. Feed costs very bearish, meat market bullish. Those who have held these positions as such have been rewarded in 2025. Is the end in sight? It’s hard to know as scarcity in cattle is still present while weather in the grains up until now is optimal as good to excellent condition ratings for corn and beans sit at 74 and 70% respectively. However common sense and mathematical theory states nothing goes up or down forever. Therefore, I devised a strategy to get long feed costs while short the Spring 2026 Board in Feeder and Live Cattle. It’s somewhat similar to a crush spread but with way less margin requirement as its defined risk with options. This serves two masters in my view for the cattle producer/grain end user. It is a hedge strategy but with relatively low margins, it’s not a bad longer term speculative strategy in my opinion. Remember funds are record long feeders and record short meal per CFTC positional data. This strategy in my view will be rewarded if funds eventually flip their positions.
Trade Ideas
Feeder Cattle versus Meal.
Buy the 300.00 vs 270.00 put spread for 750 points or $3750.00 plus commissions and fees.
March 26 feeders above 309.000
Sell the May 25 Soymeal 370 vs 320 put spread for 45 points or a $4500 collection.
May 26 meal @298.
Combined together one collects $750 less trade costs and fees.
Risk-is $4250 plus trade costs and fees. March feeders at 309. We have protection from 3.00 to 2.70.
Risk on feeders 3750, meal 500 plus trade costs and fees for both.
Margin approximately 2K for both spreads.
We feel feeders can eventually pull back from 310 to 280 while meal can rally from 300 to 330.
Live Cattle vs Corn
Buy the April 2026 210 vs 180 put spread for 450 points or $1800 per spread plus commissions and fees.
April live cattle @ 219
Sell the July 26 corn 540 vs 460 put spread for 60 cents or 3k per spread less commissions and fees.
July 26 corn @ 452.
Combined together one collects $1200 less trade costs and fees.
Risk-max risk is $2800 for both spreads combined. Margin approximately $1600 for all 4 legs.
If you would like to receive more information on the commodity markets, please use the link to join our email list Sign Up Now
Sean Lusk
Vice President Commercial Hedging Division
Walsh Trading
312 957 8103
888 391 7894 toll free
312 256 0109 fax
Walsh Trading
311 S Wacker Drive Suite 540
Chicago, Il 60606
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices.PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.