Managed Money Cuts More Long Cattle Exposure

Managed money continues to divest itself of live cattle contracts, dropping its net long position to its lowest point since the second week of January.

The Commodity Futures Trading Commission reported that for the week ended Aug. 26, managed money reduced its net long position to 93,413 contracts, its third straight week of declines and the lowest it has been since the week ended Jan. 7 when it was 79,102.

At the same time, producers covered short positions and were net short 144,046 contracts at the end of the latest reporting week, the third straight week of short covering and the lowest number of short positions since the week ended Dec. 24 when it was 144,012 contracts.

During the latest CFTC reporting week, Aug live cattle futures rebounded from its most recent low of $147.75 on its way to Thursday’s swing high of $155.42.

The Oct contract, as it becomes the nearby position, is marked by many analysts to be a month when cash supplies tighten again and prices move higher.  Oct did rise Friday, and managed money may be willing to invest more in coming weeks now that it has become the lead contract.

During the latest CFTC reporting week, total open interest declined only 2,652 contracts, or 0.86%, to 305,340 from 307,992.




Managed money also continues to trim its investment in corn futures as it moves funds out of commodities and into equities because of a general lack of performance in commodity investments and the better prospects in stocks.

During the latest reporting week, the CFTC said managed money ended with a net long position of 74,934 contracts, down from 81,791 in the previous week and the lowest it has been since the week ended Feb. 18 when it was 57,823 contracts.  Net long positions in the latest week also is down 189,479 contracts, or 71.7% from its high of 264,413 for the week ended Apr. 1.

Predictions of bumper crops and weak price trends are taking their toll on speculator confidence.

During the latest CFTC reporting week, the Dec futures contract tried to rally but fell away and continued its sideways consolidation pattern near the contract low.  Reports of better-than-expected yields out of the South and Delta and near-ideal rain conditions in the Midwest leave only an early freeze as the main threat to this crop, and forecasts do not have a killing frost hitting the US through mid-September.

The Dec contract was forming a rounded bottom on daily charts, but this seems to have dissolved into the current sideways pattern as speculators continue awaiting fresh news from the fields.

Total corn open interest also declined 60,391 contracts, or 4.59%, during the week to 1.255 million from 1.316 million.




Cash cattle markets last week were steady to mostly $3 per cwt higher at mostly $155 up to $157 on a live basis and mostly $242 to $245, up to $247 on a dressed basis.  This was somewhat of a surprise to traders since cattle had been retreating in previous weeks, although the Aug futures contract closed at $155.90 on Friday.

USDA’s choice cutout value Friday fell $0.59 per cwt to $246.30.  This was down $3.47, or 1.39%, from $249.77 a week earlier.

The USDA’s select cutout value dropped $0.88 per cwt to $234.39.  This was $5.27, or 2.20%, below last week’s $239.66.

The choice/select spread widened Friday to $11.90 from $11.62 and continues to widen seasonally as the percentage of choice production rises against the percentage of select.