Commercials Still Building Cattle Shorts

Commercials continued to add to their net short positions in live cattle futures during the week ending March 8, according to the weekly Commitments of Traders report released on Friday by the Commodity Futures Trading Commission.

The net short position of commercials was 65,343, up 4,881, or 13.3%, from the 60,462 for the previous week. This week’s net was the largest since the week ended Aug. 19 when the figure was 64,199 contracts. Commercials are firms that handle cattle at some point.

The weekly commitment of traders report shows trader positions in futures markets. A net-long position indicates more traders are betting on higher prices, while a net-short position means more are betting futures will decline.

Commercial traders reached their new position by liquidating 1,121 long positions and adding 3,760 short positions. This left them representing 18.3% of total long open interest and 41% of total short open interest.

The CME Group reported total cattle open interest for the week rose to 288,597 contracts for the week, a gain of 7,763.

Managed Money Net Longs Still Growing

Managed money, or large speculative firms, had a net long position of 25,686, up 3,489 contracts from the previous week. They had 20.3% of the total long open interest and 11.4% of the shorts.

Swap dealers had a net long position of 61,027, liquidating 1,102 longs and adding 369 shorts.

In corn, the CFTC report indicated that money managers held fast to their belief that prices would fall to another record in the week that ended on March 8. Speculative investors were net-short by 236,201 contracts, the highest ever, an increase of 15% from the prior week’s then-record, the CFTC said. Money managers had 10.3% of the long open interest and 27.7% of short open interest.

Commercials reduced their net short positions by 13,796 contracts, about 10%. They added 12, 949 longs and covered 847 shorts.

Open interest for the April contract during the week was 1,356,292, according to CME Group.

Corn exports since the start of the marketing year are down 21% while sales have dropped by 20% from the same timeframe a year earlier, according to the U.S. Department of Agriculture.

Global corn production is expected to be the third-biggest on record, while world stockpiles are forecast to be a record high, USDA data show.

Feeder Outlook

The dry conditions and warm temperatures have been an asset for calf and feeder cattle marketing as producers have been willing sellers the past couple of weeks, according to Dr. Andrew P. Griffith at the UTExtension Institute of Agriculture at the University of Tennessee.

Griffith said the trend of marketing light-weight calves will likely persist the next couple of weeks if cow-calf producers can get a trailer in the field to load calves.

He wrote in the Tennessee Market Highlights that the most likely winners in the market last week were the stocker producers who had a wide selection of calves to choose from to meet inventory needs. They were able to do so on a somewhat softer market compared to the previous week.

Griffith said profitability in 2016 will not be nearly as high as it was in 2014 and 2015 but cattle producers should still rake in profits. “these profits will result in continued cattle herd expansion but at a much slower pace than what has occurred the past couple of years,” he said. “With that in mind, normal cow culling practices are advised.” He said profitability in the cow-calf sector is greatly influenced by cow culling decisions along with calf marketing decisions.

Cash Cattle Trade

Cash cattle trade was moderate on good demand in Nebraska and the Western Cornbelt. Friday trading in Nebraska and the Western Cornbelt has been moderate on good demand. Dressed sales, in both regions, sold $6.00 higher at $220.00, compared to the week before. There was not enough live sales for a market trend. Live sales in Nebraska have sold at $136.00 and live sales in the Western Cornbelt sold from $133.00 to $134.00. Southern Plains and Colorado trading was inactive on very light demand. Not enough sales for a market trend. Southern Plains live sales sold at $136.00 and in Colorado live sales sold at $137.00 week before last. the USDA said.
Boxed beef cutout values were lower on choice and higher on select on light to moderate.demand and offerings. The USDA reported its choice cutout price was down $1.19 at $224.05 per cwt. Select was up $1.27 at $215.12. The choice/select spread was $8.93 and there were 129 loads of fabricated product sold into the spot market The CME Feeder Cattle Index for the seven days ended Thursday was $160.03 per cwt. This compares to Mar’s Friday settlement of $162.40, up 0.85.