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Funds Exiting Live Cattle Futures


The funds are exiting the live cattle market in droves. It appears this is being driven by fear. Total LC open interest yesterday was down 5,595 cars with Apr losing 3,210, Jun losing 2,471 and Aug losing 466 cars. Apr through Oct are discount to the cash steer market which traded at 164 last week. One short term negative fundamental factor is active beef imports. Due to the BSE discovery in Brazil, they’re still not exporting beef to China. Instead, they’re pushing beef aggressively to the U.S. market. Exactly why the U.S. accepts beef from Brazil I’m not sure. Regardless, their quota is about three quarters met. The quota should be hit in two to three weeks and then imports will slow substantially. In the meantime, beef packers remain in control. They’re still processing at profitable margins and they’re in control of the cash steer market. The cattle they bought last week at $1 lower, 30% of these were bought with time. Jun futures closed at their lowest levels of the entire year yesterday. Our stops on long Oct futures reside at 16020. I have no recommendations. We’re simply not adding margin risk at this time.

Cows grazing


Open interest in Apr pigs yesterday, on the collapse in the spreads and with fresh contract lows in the Apr, was down over 5200 cars. Open interest in Jun was up 2,215 with total hog OI down 2,672. Open interest in Apr calls jumped for the second day, rising by 1,303. Hog futures are focused on the fact that hog numbers continue to run above year ago levels, on the soft/lower tone in ham prices and off fear generated by the outside markets. While I consider the long-term hog supply situation bullish, clearly, the market is not focused on the long-term. I recommend staying out of the market until we see a weekly kill projection coming in 2% or lower than last year, until hams bottom and until futures clearly display some kind of bottom on the charts. This would include a key reversal and strength in the bull spreads. Until then stand aside.


Corn is a tough read at this time. A 75-cent break uncovered Chinese corn demand but the bounce was less than 30-cents off the low. Odds are it will take another move lower in prices to uncover additional demand. Yet the board is inverted and corn basis remains powerful strong especially west of the river. We’re still holding bearish positions. Recommend unwinding all bearish corn positions on a close in May over 640. Otherwise, hold. Bean meal is now trading on either side of the 465 support. We’re holding May meal 460 puts and will continue hold. Wheat prices continue to languish despite the fact that half of the KS wheat crop is rated poor. No other rec.

  • Unwind all bearish corn positions on a close above 640 in May.

For a free 30-day trial to the evening livestock wire send an email to: dennis.smith@archerfinancials.com and be sure to follow @denniscattle on Twitter.

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The risk of loss in trading futures and options on futures can be substantial. The author does not guarantee the accuracy of the above information, although it is believed that the sources are reliable and the information accurate. The author assumes no liability or responsibility for direct or indirect, special, consequential or incidental damages or for any other damages relating or arising out of any action taken as a result of any information or advice contained in this commentary. The author disclaims any express or implied liability or responsibility for any action taken, which is solely at the liability and responsibility of the user. This report is a solicitation. 

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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