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Swift's Market Comments

Get ready for live-cattle risk management strategies

Swift Trading Company nearby feeder cattle chart
If feeder cattle follow fats a little higher, it seems reasonable to look for opportunities to lay off more risk in the pricing area around $130.
Feeder cattle following fat-cattle market up, and more hedging options may happen around $130.

Fats are firmer and funds continue to be the force to reckon with. They were able to add an increase of more than 3,000 contracts to the open interest on Wednesday.

The $117.50 target for February is drawing near. I am using this target as a base to start laying off inventory, with options, for the April and June contract months.

I recommend you put pencil to paper and have those strategies you wish to execute ready.

The building strength may be enough to push February through the $117.50 target. However, I do not recommend swaying greatly from objectives. While the market is moving higher, you will be attempting to execute trades in the most friendly environment available.

Options remain the derivative of choice. Although the market is perceived putting on weather premiums, the weather is not currently disastrous. From a comment read this morning, weather is factored in, now we have to have the weather. The weather models quoted this morning off my newswire suggested to anticipate frigid cold coming in January. 

Feeder cattle continue to lag and still show no favoritism from the funds. In my opinion, it is because there is nothing bullish feeder cattle and the fat cattle scenario appears finite at this time. Therefore, work is perceived needed to solidify the recent gains. I am still holding out for the $130.00 area and anticipate this to be met.

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.

TAGS: Beef
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