Managed Money Steps Back Into Cattle

Managed money is stepping back into live cattle, even as producers increase their hedges, according to the Commodity Futures Trading Commission’s Commitments Of Traders report.

For the week ended Tuesday, the CFTC reported managed money, a proxy for large speculators, was net long by 103,924 contracts, the second straight week of increases after a decline that took it to a nine-month low.  This was 27,547 contracts, or 36.1%, more than the 76,377 of the previous week.

During the same week, producers increased their short hedge positions and by Tuesday had a net short position of 150,666 contracts.  This was 9,670, or 6.86%, more short positions than the previous week.

The interest by managed money in live cattle, however, may be short-lived as analyst outlooks for commodities in general increasingly turn bearish.  The Commodity Research Bureau Index last week dropped below major chart support as investors continued to pull out of raw materials because of poor performance in the last few years in comparison to stocks or bonds.

That poor performance could turn managed money against live cattle futures again in coming weeks.  Cash cattle last week gave back $1 of the prior week’s gains to trade at $161 to $162 per cwt, and technical analysts say last week’s weekly action suggested some sort of market top, at least in the short term.

And the first part of last week saw live cattle rising toward a new contract high, which was on the way to Tuesday’s CFTC cutoff for the latest COT report.  The contract highs came on Wednesday, and declines were seen on Thursday and Friday.

As managed money was increasing its presence in the live cattle futures market, total live cattle open interest only rose 501 contracts, indicating a balanced trade even though futures prices were rising toward those new contract highs.




While managed money increased its presence in live cattle, these investors lost interest in corn.  The CFTC reported that in the week ended Tuesday, managed money’s net long position declined to 79,952 contracts from 84,827 the week before, a 5.75% decline that was only slightly above the 74,934-contract net long position of the previous week.

During that week, some weather forecasts threatened frost in northern reaches of the Midwest, and even this past weekend’s forecasts held some promise of localized freezing temperatures.

As it turned out, though, weekend lows did not reach damage points, and the market overnight has begun removing frost premium, which could send managed money to the sidelines again.

But as harvest progresses, an increasing number of producers are lifting hedges and delivering the grain to fulfill previous commitments.  Producers’ net short positions in the latest reporting week were listed at 213,850 contracts, down 5.68% from 226,761 the previous week.  It’s the lowest short position since the week of Feb. 11 when it was 195,681 contracts.




Boxed beef markets softened Friday, but remained above week-ago prices after rising for most of the week.  The USDA reported its choice cutout Friday at $249.93 per cwt, down $1.61 for the day, but up $1.26 for the week.

The select cutout was down $1.81 Friday to $234.54, and was down $1.71 from $236.25 the week before.

Friday, there were 113 loads of fabricated product sold into the spot market with 61 loads of trimmings and ground beef.

The CME Feeder Cattle Index for the seven days ended Thursday was $227.74, up $0.76 from the previous day, while the Sep contract settled Friday at $229.47, up $1.42.