Fats vs. Feeder Cattle

Take a look at the deferreds'---- Someone buying cattle in this equation looks very wrong.


Will fundamentals win over insanity in the end?

Bottom line is Feeder Cattle looks terribly expensive relative to Live Cattle right now in some of the deferred months like April/Jan or March/June----

It will be interesting to see how this one plays out.

Anybody else follow this?

 

And seasonality says short Feeders / long cattle now for those deferred months

According to CME daily reports, there has been an increase in feedlot placement at a younger age, which increase production costs and thus prices for live cattle in the coming months FWIW.

 

Bingo!

That is the word anyways......

I am very interested.

 

Would you use the 3 Fats for 2 Feeders ratio for margin credits or a more precise one?

 

I go one for one and price it like an equity spread.....but that just me...and it gives it a bit more horsepower

 

Entered today a Short May feeders/long June Cattle @ 20.275. I expect to hold it for 6 months approximately.

Why are you watching Jan/ Apr or Mar/June? Does the Three months corresponds to the time spent in feedlots before slaughter? I am learning here.

Thanks.

 

http://www.meattradenewsdaily.co.uk/news/170811/usa___smallest_cattle_herd_on_record_0.aspx

How about the lcz11-lcm12 spread?

 

Exited on Friday for a 12K loss. Not my best trade of the year...LOL

 

sorry for your loss, I hope you can cover it soon

for cattle feeding spread (crush) CME whitepaper suggests live cattle contracts should be 4-6 months after feeder cattle contracts.
Also they propose a ratio of 1:2 for FC/LC
In hindsight your short may feeder/long june live cattle seems directional with a short bias. Also live cattle being only 1 month later increases short bias since live cattle prices are seasonally weak at summer months. Due to recent rallies, it went to deep red.

http://www.cmegroup.com/trading/agricultural/files/AC-378_CattleFeedingWhitePaper_r2.pdf

 

2 live/1 feeder ratio is more suitable imho.


this document may be a bit old but I believe general principles stilll hold.
http://www.danielstrading.com/resou.../trading-the-cattle-and-hog-crush-spreads.pdf

tells that upto 85% reduced margin credits are given to
1-Corn contract and 1-Feeder Cattle contract versus 2-Live Cattle contracts