That was a great week for cattle futures with the technicals signaling a breakout. Open interest did not grow, but prices did eclipse the September highs for futures contracts. After futures rallied, cash followed suit. A dismal thought of possible $215 trade ended the week with the north getting $220, and the south renewed trade around $226.
In the north, it was perceived that feedlots are not current and packers did not need cattle. Many packers entered the market once cash started to trade. My favorite part of the trade is that Eastern, IA has a good attitude about cash even with Joslin closed. Two smaller packers are throwing out bids in that part of the country alongside some majors. There are small regionals that would like to grow now that there is some money to be made. Also, with a smaller size, smaller packers have the ability to use futures to help offset risk.
The first week did not have deliveries on the October board which surprised some people. However, it is worth noting that most cattle weigh more than the CME allows for delivery on the futures contract. Producers are still making cattle big and only rumors of future discounts are happening. The weight is welcomed until we have one too many. If we can get through this fall run without falling behind, it will give us more traction for a fourth quarter rally.
Demand news is very mixed. You can find what you are looking for if you are bullish or bearish. We do know that imports remain record strong and does not appear to be close to an end. Have a good week.
The risk of loss when trading futures and options is substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results.