Commentary: April Live Cattle opened higher as equity markets were strong as the markets opened. Cattle went limit up for most of the session with hiccups mid-morning and the end of the session as equities pulled back from their highs. The last equity pullback prevented a limit up settlement as price dipped and settled at 105.45 up 2.60 on the session. The limit move closed the gap from Friday’s low at 105.65 to Monday’s high at 105.225. The high was 105.85. Equities soared after the cattle close, so hopefully the markets are starting to stabilize. The administration is talking up fiscal stimulus and it looks like there is bipartisan support for it. Stay tuned! The cattle collapse in the face of stable cutout prices has given packers another nice profit opportunity and put producers once again behind the eight ball. The unseasonal decline in price has put stress on producers as it has taken price into the lower end of its trading range when it is normally in the upper end of the trading range, in my opinion. This could set up a recovery rally as abnormally low prices could snap back on any settling down of the outside markets. I think markets are oversold and any hint of a slowing down of the spread of the coronavirus and fiscal stimulus could lead to massive short-covering, in my opinion. Resistance is at 106.025, 107.30 and then 108.65. Support is at 104.85 – 104.20, 103.00 and then 101.65. Cash trade was at a standstill on Monday. Boxed Beef cutouts were lower on light to moderate demand and moderate offerings. Choice cutouts decreased 0.27 to 207.09 and select was down 3.61 to 198.71. The choice/ select spread widened to 8.38 and the load count was 138. Slaughter was estimated to be 123,000.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursdays and our next webinar will be on Thursday, March 12th at 3:00 pm. It is free for anyone who wants to sign up and the link for sign up is below. If you cannot attend live a recording will be sent to your email upon completion of the webinar.
**Call me for a free consultation for a marketing plan regarding your livestock needs.**
Trade Suggestion(s):
Live Cattle: Buy the April 110 call on a pullback in futures at $1.50 or $600 plus commissions and fees. I think futures can retrace at least 38.2% of the down move from the 12/13/19 high (127.90) in the lead contract to the potential low on 3/9/20 (102.75). The 38.2% retracement is at 112.35. I have more ideas for you, depending on your situation. Give me a call and lets talk.
Risk/Reward:
Futures –
Options – I think your risk should be in accordance to your account size and/ or your risk tolerance. The maximum risk is the price paid plus commissions and fees per contract. If the options can reach $4.50 or $1,800 look to liquidate position.
Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
Direct: 312.957.4163
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