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Swift's Market Comments
Supply bears are fading right now

Supply bears are fading right now

The time and price levels are getting near to scale in some selling strategies for feeder cattle.

 

Bears remaining hellbent on supply are losing ground quickly. Current price levels are being touted by some as retracement levels and to begin selling again. I recommend you not be so quick to do so.

The on-feed report suggests fears of growing numbers have been negated. With winter coming on and numbers not nearly as burdensome as previously thought, I continue to anticipate further upside movement. This week's trading may be void of large movements or volume due to the Thanksgiving Holiday. However, with February now fully above the previous Sept. 22 high, there is little to stand in the way until the August high is approached. That high is at $116.20.

Feeder cattle marketing targets are between the Sept. 22nd high at $125.57 and the August high at $137.07.

Demand remains stout and outside market forces perceived as advantageous towards further upside movement.

Even more interesting as I write this is the price moving higher in the wake of a record week in beef and pork production. 

Feeder cattle appear to be benefiting from the fats.

Although both are anticipated higher, the feeders have some issues to overcome. This may keep them from being as stout as fats or potentially turning them lower if the fats begin to stagnate. With January flittering around at the September 22nd high, there is some anticipation for a few days sideways before resuming the uptrend.

With it anticipated for spring feeders to move back to the August high per respective contract month, I would begin looking to scale into hedges for the March, April and May contract months. I use scaling due to the potential for inclement weather and unknown of how strong this rally really is.

The back months remain short of their Sept. 22nd high. Therefore, upon reaching this level is where I want to start laying off the first of however many cattle you have to market.

Using the March contract, the Sept. 22nd high is at $125.57 and the August high at $137.07. This $12.00 spread is anticipated to produce at least two to three opportunities to lay off some risk.

How you do it is likely much more crucial at this time with upside potential still very possible. I recommend using strategies over outright futures sales. Options strategies may or may not provide adequate downside protection while still allowing for a percentage of upside potential.

Again, this week is anticipated to be soft due to the abbreviated trading week. 

An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of their margin deposits. You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. Past performance is not necessarily indicative of future results.

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