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Swift's Market Comments

Live and feeder markets still showing upside potential

Live and feeder markets still showing upside potential
Hedging options available, but it appears selling calls or placing a bear put spread better than a futures position or buying options.


On the live-cattle front, with basis narrowed both producers and purveyors appear to be on more even ground.

As the August contract relegates itself to cash, the October contract appears to have some upward potential. A trade to the $120.00 area remains the upside target.

Last week's consolidation is perceived as some solid footing from which to launch another round of buying. I will remain hesitant to make sales that would solidify the trade.

Instead, I recommend opting for the sale of a call option or purchase of a bear put spread in an attempt to mitigate adverse price fluctuation. Both of these strategies allows for a slight variance between final sale and hedge.

Live cattle basis has narrowed and my analysis says we could yet see $120 or thereabouts in the October contract.

My analysis suggests that there is still some upside potential to this market. Allowing for some time to pass may be of significant benefit. 

Feeders continue to march higher. The good grazing conditions and demand from farmers is perceived producing a firm footing for feeder prices.

I understand some will be anxious to lock in the recently gained price, but I recommend doing so in a manner that allows for further upside potential. Again, selling calls or buying a bear put spread is encouraged over a futures contract or put option. Option premiums remain elevated to the point that their use can detract from the hedge. While this was not an issue when the market was perceived still in a bear trend, the slight change in conditions leads me to make slight changes in the approach to hedge. At this time, I anticipate a firming trade.

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