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Shorts Continue to Cover in Live Cattle


Cash will be called lower. Cutout was sharply lower on Friday. If hogs trade higher today, we are a seller, establishing a new short position. I’m expecting a seasonal low into the middle part of November. Export demand from Mexico appears to be slowing and this is forcing ham prices lower. The old saying is hog futures will follow ham prices.

  • Sell Dec lean hogs at 8190, buy stop at 8290 stop.
  • Buy Dec 83 puts/sell 73 puts/sell 88 calls at 120 points. It will take a bump higher in futures, from 8150, to get this hedge executed.


Live cattle futures volume was 45,770 on Friday with open interest dropping nearly 2k. There was a sharp, very sharp drop in FC open interest, down 1,152. Recently bearish traders got caught in a trap and they’re still coming out. New money, fund money will soon start to enter the live cattle market. I’m anticipating a sharply higher move, over time, in both fats and feeders. Beef should stabilize this week. Last week’s total load count was 722 (boxed beef) which was the third largest of the year. The cash steer market has already stabilized. Last week’s harvest was impressive at 657k and this week could challenge 660k. Negotiated volume has been very large for two consecutive weeks. Packer margins remain historically profitable. If the futures market begins anticipating what I’m anticipating, futures will continue to rally. To add leverage with limited and defined risk, I like buying large numbers of the Jan FC 186 calls.

  • Buy Jan FC 186 calls at 40 points. ($200 premium outlay)


Not much happening in the grain market overnight. The crop report will be released tomorrow at 11:00. The trade guesses were provided in Friday’s evening livestock wire. My buy zone in the Dec bean oil, 6100-6050, was reached last night and we had some buy order filled at 6100. That’s been the session low. Cash palm oil was unchanged overnight and palm oil futures pulled back in what appeared to be light profit taking after scoring record highs last week. Malaysian end of Sep stocks was down 7%. Crude oil is sharply higher. I have no new recommendations.

Questions or comments at +1 312 242 7905. Follow me on Twitter @denniscattle

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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