Only Small Adjustments Made To Cattle Positions

Managed money investors and cattle producers made only small changes to their net long or short positions during the week ended Jan. 13, a week when futures prices and total open interest were dropping.

In its weekly Commitments of Traders report, the Commodity Futures Trading Commission reported that managed money, a proxy for large investors, actually nudged their net long positions slightly higher, to 81,345 contracts from 81,179 the previous week.

At the same time, cattle producers decreased their net short positions to 119,569 contracts from 122,467 the previous week.  This is the smallest net short position these traders have had in more than a year.  They did it mostly by covering 3,135 previous short positions while liquidating only 237 long positions.

During the latest reporting week, the live cattle futures market began a week of dramatic declines that saw steep losses into Friday’s small bounce.  On Jan. 6, the Feb contract was near the top of the latest cycle high, topping a rally that had taken it from the Dec. 18 low of $155.15 per cwt to the rally high of $166.92 on Jan. 8, for an $11.77, or 7.05%, gain.

But Jan. 8 saw the cattle market shift gears.  Feb dropped sharply and on Jan. 9 gapped lower on daily charts.  A feeble rally attempt Jan. 10 was unable to close the gap, and the market fell from there.

Total live cattle open interest during the latest reporting week declined to 269,863 contracts from 273,093 the previous Tuesday, a slide of only 3,230 contracts, or 1.18%.




While cattle values were dropping sharply, corn producers and managed money investors were hitting corn futures hard but actually increasing total open interest slightly to 1.275 million contracts from 1.258 million the previous Tuesday.

Managed money cut its net long corn position, by 26,319 contracts, or 11.55%, to 194,682 contracts from 227,800 the previous week.  This is the lowest they have been since the week ended Dec. 2 when they were net long by 186,611 contracts.

Producers, meanwhile, covered 49,030 contracts, to take them to a net short position of 330,505 contracts from 379,535 the previous week, a 12.9% decline.

During the latest CFTC week, the Mar contract declined to $3.85 ½ a bushel from the most recent high of $4.08 ½.  However, almost all of  this decline took place on Jan. 13 when the contract made an outside reversal lower.

It’s not clear at this point whether either contract will follow through with Friday’s gains after Monday’s holiday.  A case could be made that either contract has found support, but last week’s late-week gains may also just be a short lull in the storm.