Selling (Going Short) Live Cattle Futures to Profit from a Fall in Live Cattle Prices

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Selling (Going Short) Live Cattle Futures to Profit from a Fall in Live Cattle Prices

The price of Live Cattle Futures is 81.200 USD (per pound) today.

Will Live Cattle Futures price grow / rise / go up?

Yes. The LC price can go up from 81.200 USD to 99.906 USD in one year.

Is it profitable to invest in Live Cattle Futures commodity?

Yes. The long-term earning potential is +23.04% in one year.

Will LC price fall / drop?

What will Live Cattle Futures price be worth in five years (2025)?

The Live Cattle Futures (“LC” ) future price will be 100.129 USD.

Will LC price crash?

According to our analysis, this will not happen.

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Referenced Symbols

In a year with markets focused on elections, interest rates and domestic terrorism, the quiet, uncorrelated waters of the live-cattle market could be a welcome reprieve for your portfolio this summer.

Dollars are dollars, and if you’re like me, you don’t care much if they come from your shares of Apple AAPL, -1.43% , contracts of crude oil or that old painting in Aunt May’s attic. They’re all green and all spend the same.

Which is why you shouldn’t turn up your nose at smaller markets like cattle. While the spotlight may pass by these lower-volume markets, they are often very seasonal and can present some of the best option-writing opportunities for investors who understand their fundamentals.

Pop-culture analysis has it that beef prices rise in the summer because “grilling season” is in high gear, driving demand for steak and burgers, resulting in a price rise.

While its true that you’ll likely pay more at the supermarket in July for that T-bone than you will in February, its not all the function of that simple demand play. In fact, seasonal grilling demand plays only a small role.

The seasonal fundamentals of the cattle market

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The seasonal chart below shows that cattle prices do indeed tend to trend higher during the summer months. But this is more a function of the supply cycle than that of demand.

Cattle prices have historically tended to climb during summer months – but not for the reasons you may think.

True, beef demand gets a bump in the summer time. But the cattle used to supply that beef were being priced on feedlots back in February and March.

Cattle slaughter peaks in May and June and then tends to level off as feed supplies are lower during summer months. Some of these cattle are replaced on feedlots. But heavy beef supplies and typically more expensive summer feed prices prevent operators from immediately rebuilding numbers on feed.

Thus cattle supplies tend to dwindle into autumn. This tendency is illustrated in the chart below.

U.S. cattle slaughter tends to peak in the spring and then taper off, resulting in declining cattle supplies through the summer months.

Note however, that as fall brings U.S. corn and soybean harvests (and thus a wave of new and cheaper feed supplies) operators typically then begin rebuilding on feed stock pens — beginning the cycle anew.

Cattle market 2020

As always the disclaimer for seasonals, these are tendencies only. Individual-year fundamentals can trump a tendency. Thus, seasonal patterns are not foolproof.

This year, 2020, brings a year with healthy, although not burdensome cattle supplies. As of the latest cattle-on-feed report (at the time of this writing), U.S. cattle-on-feed stood at 100.5% of last year. While placements into feedlots were up 7.5% over last year, marketings (or sales) were also up. This, along with the seasonal slaughter surge, is a big reason cattle prices find themselves in the doldrums now.

But a look back at the seasonal chart shows this is “normal” price behavior for this time of year.

However, as we now head into the higher-demand, lower-supply summer months, we have every reason to expect prices will soon begin at least a modest recover into autumn. This can set the stage for put sellers.

Strategy

The cattle market tends to follow a somewhat predictable supply cycle throughout the year. While this may not always produce an immediate and noteworthy correlation in prices, the seasonal tendencies are well defined.

With cattle prices now at their lowest levels since 2020, we expect cyclical factors to begin supporting prices as early as this month. While we are not in the business of predicting where prices will go, our projections can give us a fairly good idea where they won’t.

One way to potentially take advantage of the near-term outlook would be to sell the December Cattle 1.00 put options for premiums of $400-$450.

December 2020 Live Cattle

Normal seasonal price patterns could render the options near worthless by the time the first corn bushel comes out of an Indiana field.

In the meantime, this market is not only a great diversifier for your portfolio, it can bring some great conversation to the summer barbecue grill.

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Live Cattle Cash (LEY00)

Live Cattle Futures Market News and Commentary

Cattle futures closed Friday with $0.30 to $4.50 losses; they will trade with expanded limits on Monday. Feeder cattle futures dropped $2.42 to $3.55 on Friday, for April that pushed them $12.82 lower wk/wk. The April 2 CME Feeder Cattle Index was $121.07, down by $5.02. The weekly CoT report showed managed money was 2,777 contracts less net short cattle on 03/31 than the previous week. That is only the fifth time on record spec traders had been net short for cattle. For feeder cattle, spec traders were back to net long by 1,073 contracts. Cash trades have slowed this week since limited activity around $112 – $113 earlier. Some $105 trade was reported on Twitter on Friday. Wholesale boxed beef prices were lower in the afternoon update widening the Chc/Sel spread to $14.60. Choice boxes were down by $2.20 to $230.44 cwt. and Select boxes were $6.28 lower at $215.84 cwt. FI cattle slaughter through Saturday was estimated at 626,000 head. That is 50,000 head below last week. YTD cattle. Read more

Price Performance

since 03/03/20
Period Period Low Period High Performance
since 01/03/20
since 04/03/19

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Things were wild this week but back in.

It was a wild start to Q2 with cattle markets making new lows, grains selling off and a record surge in unemployment. Payroll protection applications started to be accepted Friday with the US economy on.

More down side for cattle and hogs

Lean hog futures closed with $4.25 to $4.50 losses in the front months. April hogs were $18.23 lower wk/wk. The April 1 CME Lean Hog Index was another $1.38 lower to $63.08, nearly $22 premium to April.

Cattle futures closed Friday with $0.30 to $4.50 losses; they will trade with expanded limits on Monday. Feeder cattle futures dropped $2.42 to $3.55 on Friday, for April that pushed them $12.82 lower.

Margin Resources & Monthly Live Cattle Chart, Trading Levels 4.06.2020 & Weekly Levels

I follow many trading products using the same mathematical formulas for intraday, daily and weekly trends.

After falling by the expanded limits on Thursday, the front month futures are down another $0.45 to $3.87. April options expire today, with a huge range of pin candidates in play. Feeder futures are down.

Lean hog futures continue to fall, with the Jun contracts already at the expanded limit threshold. April is $2.65 lower so far. The April 1 CME Lean Hog Index was another $1.38 lower to $63.08, nearly.

Tighten your stop

Barchart Technical Opinion

The Barchart Technical Opinion rating is a 56% Sell with a Average short term outlook on maintaining the current direction.

Long term indicators fully support a continuation of the trend.

Symbol Last Change
LEY00 112.000s unch
Live Cattle Cash
LEM20 80.850s -2.225
Live Cattle
GFK20 108.100s -3.550
Feeder Cattle
HEM20 48.325s -4.500
Lean Hogs
DLM20 13.13s -0.47
Class III Milk
Symbol 3M %Chg
LEY00 -8.20%
Live Cattle Cash
RJA -15.87%
Rogers Agriculture ETN Elements
DBA -17.54%
DB Agriculture Fund Invesco

Key Turning Points

2nd Resistance Point 112.000
1st Resistance Point 112.000
Last Price 112.000s
1st Support Level 112.000
2nd Support Level 112.000
52-Week High 126.000
Fibonacci 61.8% 114.922
Last Price 112.000s
Fibonacci 50% 111.500
Fibonacci 38.2% 108.078
52-Week Low 97.000

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