Cattle futures have been consolidating with a downward lean as the supply vs demand battle has (so far) been fought to a draw, in my opinion. With ample supplies of cattle and excellent demand for beef, cash prices have also remained in a trading range. The cattle on Feed report comes out on Friday after the close of trading. Pre-report estimates has cattle on feed as of August 1 to be up 4.4% over last year, placements in July to be up 5.5%, and cattle marketed up 4.9%. If this comes true on Friday, it would be the fourth report in a row with higher numbers. With on feed numbers continuing to be elevated and seasonality (summer grilling season coming to its end) factors coming into play, the downward lean in futures could extend and price could fall. Producers could protect themselves from a possible breakdown in price by buying an October 148 Feeder Cattle put option at $2.00 and selling 2 October 159 Feeder Cattle call options at $1.10. You would collect $.20 ($100), less commissions and fees.
For those interested I hold a weekly grain (with Sean Lusk) and livestock webinar on Thursday, August 23rd 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.* *
Ben DiCostanzo
Senior Market Strategist
Walsh Trading, Inc.
Direct: 312.957.4163
888.391.7894
Fax: 312.256.0109,
www.walshtrading.com
RISK DISCLOSURE: THERE IS A SUBSTANTIAL RISK OF LOSS IN FUTURES AND OPTIONS TRADING. THIS REPORT IS A SOLICITATION FOR ENTERING A DERIVATIVES TRANSACTION AND ALL TRANSACTIONS INCLUDE A SUBSTANTIAL RISK OF LOSS. THE USE OF A STOP-LOSS ORDER MAY NOT NECESSARILY LIMIT YOUR LOSS TO THE INTENDED AMOUNT. WHILE CURRENT EVENTS, MARKET ANNOUNCEMENTS AND SEASONAL FACTORS ARE TYPICALLY BUILT INTO FUTURES PRICES, A MOVEMENT IN THE CASH MARKET WOULD NOT NECESSARILY MOVE IN TANDEM WITH THE RELATED FUTURES AND OPTIONS CONTRACTS.