Cattle Producers Cover Short Positions

Cattle producers covered short positions while managed money liquidated long positions during the latest reporting week, yet total open interest went up.

During the latest week, total live cattle open interest rose to 317,687 contracts from 312,383, a 1.70% increase.

At the end of the latest reporting week, Tuesday, Sep. 30, the Commodity Futures Trading Commission reported managed money had a net long position of 107,190 contracts, down 2,746, or 2.50%, from 109,936 the previous week.  It was the second straight week of net declines, and current holdings are the lowest since the week ended Sep. 9.

During the same week, producers covered 4,730 short positions to end at 141,644 contracts, down 3.23%, from 146,374 a week earlier.  Producers continued to cover in preparation for cash sales to packers.  It was the third straight week of producer short covering, closing in on the week of Sep. 2 when they held a net short position of 140,996 contracts.

Other reportable traders boosted their short positions going to 22,263 contracts from 18,548 the week before, a 20.0% increase.  These traders have been increasing their net short positions for the last three weeks from 12,310 for the week ended Sep. 9.  They now hold their largest net short position since the week ended June 3 when they were short 33,206.

The Dec live cattle futures contract price during the latest reporting week rounded out a bottom on daily charts and then jumped sharply on Friday and Monday.  Subsequent gains have set new contract highs amid fears of shortages and prospects for low-cost feed.




For the latest reporting week, the CFTC reported managed money had liquidated more corn positions.  This can be correlated to continued reports of phenomenal yields, even if the harvest progress is a little behind schedule.

Managed money held a net long position of just 70,244 contracts, the CFTC said, the lowest since the week ended Feb. 18 when it was 57,823, a difference of 12,421, or 21.5%.

During the latest reporting week, the CFTC said producers increased their net short positions by 10,018, or 4.30%, to 242,860 contracts from 232,849.  Producers haven’t been this short since the week ended July 8 when they were net short 253,952 contracts.

Interestingly, “other reportable” traders are increasing their net long positions after being net short just two weeks ago.  The CFTC reported these traders were net long by 26,650 contracts, compared with 2,840 the previous week and a net short position of 5,856 the week before that.

While all that was going on, total corn open interest eked out an 8,000-contract gain to 1,285 million, and prices for the nearby Dec contract were headed lower into Tuesday’s contract low.  The contract has since made a small recovery.




Cash cattle markets last week traded about $2 per cwt higher on a live basis at $160 to $162.  Dressed-basis trading was up as well, although it was lightly traded in traditional dressed-basis markets and therefore difficult to get a grip on just how much it was up.  Reported dressed-basis trades ranged from $252 in Iowa to $259 in Kansas.

Packer margins likely will be affected negatively, even though boxed beef prices are up for the week.  Product gains in value were small compared with gains in live cattle prices.

The USDA reported its choice boxed-beef price Friday at $238.32, down $0.13 from Thursday, and its select cutout value at $226.36, down $0.97.  The choice cutout was up only $0.66 for the week, while select was up $0.88.