Farm Progress is part of the Informa Markets Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Swift's Market Comments

Futures still ignoring the fundamentals

Swift Trading Company nearby live-cattle chart with basis
Live cattle on this chart show an upward trend, but lag cash by a shocking basis. Feeder futures are trending up, too. The size of the basis remains a mystery.
Trying to hedge now appears to offer more punishment than reward.

Exports continue to rise. Demand continues to surprise. Futures continue to disregard. This is stranger than fiction and I do not have a clue as to the persistence of this basis spread. 

Last night I wrote this in my Shootin' the Bull commentary: Hell bent that supply will swamp demand is a factor so ingrained at this juncture, only proof is anticipated to break it. I can’t say that it won’t either.

However, what I choose to do is not help it in anyway. I understand the pressures that lenders are applying at this time. I would urge readers to use strategies that cost the least in an attempt to not thwart what is naturally taking place. That is, demand is good and supplies just not as burdensome.

If the burden of supply does begin to weigh on prices, then one only need look at the worst we’ve seen so far, $98.00 cash, and anticipate cash falling to that point. Were that to materialize, then selling August or October at this level would potentially produce a whopping $4.00 profit and the loss of nearly $28.00 in cash. My thought only is that regardless of how bad cash gets, the likelihood of it reaching $98.00 between now and August is not very good.

Again, I can’t say it won’t, just that the risk is skewed at such discounts. How much price can you potentially protect? The answer is $4.00 if we elevate numbers on feed at weights seen in the fall of 2016 by this August.

The upward slant of the trading range in the August feeder cattle contract versus the flat trading range of this spring's months suggests feeders want to move higher in the future. I anticipate that after next week's seasonal tendency concludes, feeder cattle will begin to rise.

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.

Hide comments


  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.