Managed Money, Producers Buy Cattle

Managed money and cattle producers tend to make market moves that are opposite each other, but in the week ended Tuesday, the Commodity Futures Trading Commission reported they both were in a buying mood.

The CFTC reported that managed money, a proxy for large speculators, increased their net long positions by 16,183 contracts to 94,121 from 77,938 the previous week, a 20.8% jump.

During the same week, producers covered 3,050 short positions, resulting in a net short position of 140,996 contracts, a 2.18% decline from the previous week’s 144,046 net short positions.  This is the lowest net short position producers have had since the week ended Dec. 3, 2013, when it was 137,646 contracts.

As a result of the overall buying interest, what appeared to be a significant futures setback just before the Labor Day holiday weekend, was turned around last week, and prices tickled contract highs by Friday.

During the latest reporting week, total live cattle open interest rose 2,710 contracts, or 0.89%, to 308,050 from 305,340 the previous week.  The Oct live cattle futures contract rose to a spike high of $155.42 per cwt on Thursday before gapping lower on Friday just before the holiday as traders did some month-end book squaring before the long holiday weekend.

When the market reopened on Tuesday, however, the Oct contract gapped higher, and prices have trended higher ever since.  Technically, that leaves Friday’s market flapping in the breeze, with gaps that may want to be filled later.  But in the short term, the one-day island shows that sellers then were wrong, and further buying interest is likely.




While managed money was picking up a few more live cattle contracts, the CFTC reported they also were buying corn.  Frost fears tend to make speculators jittery, and such fears were present in the market at that time, even though they weren’t in the forecasts.

During the latest reporting week, managed money increased its net long position to 84,827 contracts, a gain of 9,893, or 13.2%, from 74,934 the previous week.

Swap dealers, those who deal primarily in swaps for a commodity and use the futures markets to manage or hedge the associated risk, are holding the largest long positions currently.  They have a total net long position of 281,273 contracts, 231.6% more than managed money.

Corn producers by Tuesday held a net short position of 226,761 contracts, down only slightly from the 219,787 contracts held the previous week and the smallest since the 217,073 net short positions the week ended July 29.

For most of the latest reporting week, the Dec corn contract moved in a narrow sideways pattern before dropping sharply on Tuesday following the long holiday weekend when frost predictions still were absent from the weather forecasts.  Many had held steady going into the weekend on the chance that frost predictions could appear.




Cash cattle markets in the Plains traded Friday at $162 to $163 per cwt on a live basis, up $7 from last week.

The USDA’s choice boxed-beef price Friday was up $0.55 per cwt to $248.67, while select beef was up $1.56 at $236.25.  Choice beef was up $2.37, or 0.96%, from $246.30 a week earlier, but select was up $1.86, or 0.79%, from $234.39 a week earlier.

The choice/select spread narrowed to $12.42 from $13.43 on Thursday, and there were 129 loads of fabricated product sold into the spot market.

Tight feeder cattle supplies also are pushing this market.  The CME Feeder Cattle Index for the seven days ended Thursday was $224.28, up $1.37.