Managed Money Cuts Cattle Positions

Managed money cut back on its net long live cattle positions during the week ended Tuesday while producers covered some of their short positions, according to data from the Commodity Futures Trading Commission.

Producers may have been lifting hedges as managed money speculators were moving out of commodities in general because of a lack of performance and bearish outlooks from analytical firms.

For the week ended Tuesday, the CFTC reported managed money’s net long position in live cattle at 110,477 contracts, down 6,237 contracts, or 5.34%, from 116,714 a week earlier.

During that trading week, the Oct futures contract fell to a low of $149.62 from a high of $159.25 the previous Tuesday.  The contract continued to decline to a low of $146.80 on Wednesday where it rebounded after hitting technical support.

The fact that the market encountered technical support could indicate renewed interest by managed money in live cattle, especially since some analytical firms see live cattle as the only one with a longer-term bullish outlook.

Cattle producers, through the week ended Tuesday had a net short position of 162,960 contracts, down 5,486, or 3.26%, from 168,446 contracts the previous week.

Total Cattle open interest for the week ended Tuesday declined 5,485 contracts, or 1.70%, to 316,248 contracts from 321,733, reflecting the liquidation of managed money and the short covering by producers.




As weather reports remain favorable and crop prospects improve, the long-range outlook for corn production remains very favorable.  Because of these improved crop prospects and the limited bullish opportunities, managed money reduced its net long positions during the week ended Tuesday.

The CFTC reported managed money had a net long position of 84,054 contracts, down 10,464, or 11.1%, from 94,518 the previous week.

At the same time, producers increased their net short positions by 3,244 contracts, or 1.43%, to 230,189 from 226,945 the previous week.

During that week, the Dec futures contract was consolidating near its latest lows.  It now appears to have formed a rounded bottom on daily charts, which may lead to further technical support and a corresponding rebound in speculative interest.

That is, unless weather and prospects for a bumper crop don’t get in the way.  Heat forecast for parts of the Plains and Midwest this week likely will spur corn development, and sporadic rains are expected to play into the hands of soybean needs as well.

The annual Pro Farmer crop tour gets started today, and much will be made of field reports as the two groups move through the Corn and Soybean Belt looking at crops and their yield potential.

The two main factors working against each other are worries about an early frost that would kill the plants and halt production and export possibilities.  Currently, there are no forecasts for an early frost, even though the market appears to be factoring in just such a possibility, and US corn exports are not competitive in the world market.




Last week’s $5 drop in live cash cattle prices showed the market remains weak, although they appear to be nearing chart support.

Market sources say retail grocers are reporting a pullback in consumer demand as higher wholesale prices from previous weeks find their way to the meat counter.  If such recoiling continues, it could prove difficult for feedlots to push prices again until supplies of slaughter cattle decline or they are marketed at lighter weights.