Fats vs. Feeder Cattle

Discussion in 'Ag Futures' started by foo, Sep 21, 2011.

  1. foo


    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?
  2. TraDaToR


    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.
  3. foo



    That is the word anyways......

    I am very interested.
  4. TraDaToR


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


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


    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.:)

  7. TraDaToR


    Exited on Friday for a 12K loss. Not my best trade of the year...LOL
  8. 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.

  9. 2 live/1 feeder ratio is more suitable imho.

    this document may be a bit old but I believe general principles stilll hold.

    tells that upto 85% reduced margin credits are given to
    1-Corn contract and 1-Feeder Cattle contract versus 2-Live Cattle contracts
    #10     Mar 17, 2012