Managed Money Cautiously Bullish Cattle

Managed money became more bullish on live cattle during the week ended Tuesday, but they did so cautiously, nudging their net long position higher for the second straight week.

The Commodity Futures Trading Commission’s Commitments of Traders report, for the week ended March 17, shows managed money with a net long position of 53,684 live cattle contracts, up 1,711 contracts, or 3.29%, from 51,973 the previous week.

At the same time, producers and others who handle the cattle decreased their net short positions by 223 contracts, or 0.24%, to 94,021 from 94,244 the previous week.

The CFTC report said changes in the net position of managed money came as these speculators added 1,216 long positions and trimmed 495 short positions.  They also added 3,425 spread positions.  The action left managed money’s long position representing 27.0% of long open interest with their short position representing 6.3% of total open interest.

Producers arrived at their new positions by adding 1,020 long positions and 797 short positions, the CFTC said.  This left them representing 12.5% of total long open interest and 48.8% of total short open interest.

Total cattle open interest during the week rose 11,097 contracts, or 4.47%, to 259,529 from 248,432.

During the latest reporting week, the Apr futures contract corrected lower for two days before resuming its current bullish trend.  The contract on Tuesday, March 10, hit a high of $155.00 per cwt, a low of $153.35 and a close of $154.75, followed a week later by a high of $154.10, a low of $153.20 and a close of $153.57.




As managed money adjusts its net long cattle position, the real story for the industry may lie in the way managed money took its net long position in corn to a net short position during the week.  The CFTC reported that these speculators were net short by 63,058 contracts after being net long the previous week by 14,866.

Some analysts said the drop of 77,924 contracts took managed money to their lowest position in years.

During the week, managed money liquidated a net 11,919 long positions and added 66,005 short positions while increasing their spread positions by 10,715.  In the end, they represented 14.0% of long open interest and 18.7% of short open interest.

During the same week, producers slashed their net short positions by 67,257 contracts, or 28.5%, to 168,762 from 236,019 the previous week, taking them to their lowest net short position in more than a year.

The CFTC said producers added 42,255 long corn positions and covered 25,002 short positions to leave them representing 24.3% of long open interest and 37.0% of short open interest.

During the reporting week, the May futures contract struggled to move higher, only to fall on Monday.  The contract settled Tuesday, March 17, at $3.71 a bushel, compared with $3.82 ¼ a week earlier.  Subsequent to the latest CFTC week, the contract declined to a low of $3.67 on Wednesday before turning higher again.

But in spite of the narrowing of net positions by managed money and producers, total open interest during the week rose to 1.331 million contracts for a gain of 6.91%.




Cash cattle markets last week were steady to firm, compared with a week earlier at $161 to mostly $163 per cwt on a live basis.  Shorter feedlot showlists were said to have helped the negotiating positions of cattle owners, but the higher prices ate into packer margins.

The CME Feeder Cattle Index for the seven days ended Thursday was $213.97 per cwt, up $1.36 on the day.  Mar futures settled Friday at $214.87, up $0.82.




–Traders are viewing Friday’s USDA Cattle-on-Feed report as neutral to somewhat bullish with February placements below expectations.  However, with Friday’s push to higher prices, much of any bullishness may already be in the market.

–While the Federal Open Market Committee removed the word “patient” from its statement following its monthly meeting last week, other official comments, along with those of Chairwoman Janet Yellen were more accommodative, which equities markets are taking to heart.