August Cattle

Discussion in 'Commodity Futures' started by criveratrading, Feb 14, 2008.

  1. What are your calls on where we will see August Cattle by August option expiration?

    My bias would be to short Cattle going into summer but I don't have the facts on moisture reserves or how pasture condition may fare.

    Any views on where the back months go? Corn to push em higher?
  2. August will outperform october cattle, spread idea would be buy agust sell october. look for anything from 4.60 to 5.20 to the sell as a great opp. to enter that spread
  3. Hi ,

    I bought an August 88 put today for 110pts.

    I guess my rationale for being bearish on August Cattle is based on the following points:

    Cash bids today are around 88-89. I think the premium August has to spot values is too high. Even though I do believe that current cattle liquidiation, including heifers, driven by feedlots that want to avoid the shock of fattening their animals further b/c of expensive feed, will result in rationing and tighter supplies, I think that will be more notable in more deffered contracts.

    I believe the US will post recessionary economic conditions into the end of Q3. I believe that the demand side of the beef market will come under pressure as consumers migrate down the protein scale and buy cheaper alternatives.

    With news of packers closing down processing plants, converting them into cold storage because of excess capacity, and negative margins I can't see them paying up for fed cattle indefinitely.

    My view is demand based pricing rather than cost plus pricing that would lead one to think that fed cattle prices need to rise to "buy more margin" for feedlots.

    As far as cows being culled I'm not so sure I have a handle on that. One one hand I believe cows are being diverted to dairy to take advantage of higher dairy prices rather than breeding them and creating more "expensive to fatten calves".

    And then comes the weather, pasture conditions, etc. A big "what if" but after listening to weather "experts" I'm done trying to forecast it. I thought I was making a calculated bet by buying OJ Calls into 2007 hurricane season with NOAA experts calling for an active season. All I'm saying is I'm not sure if summer will be a scorcher or not, but August is a good seasonal time I'd think for being short cattle if pasture conditions deteriorate into summer.

    Any views appreciated; including why you view August as an outperformer to Fall cattle. Also trying to think of a trade in Milk options and leaning on the bearish side.