Cattle & Ranch Report

May 2, 2025

Live Cattle:

This week’s cash trade has been developing over the last couple days with $222-$224 in the north and $215-$218 in the south.  I’ve heard rumors that a few traded at $226, although not confirmed.  With June now the spot month and trading $210, the obvious question is why are we not substantially higher on that news.  Reduced kills and a choice box market that has been down for 2 sessions after a $15 run in 5 days may shed some light on this question.  I believe this move is getting tired and a correction in both boxes and futures is overdue and could be seen next week.  The $20 run in June futures in the month of March corrected $15 in April.  The subsequent $20 run off of those lows appears to be stalling on bullish news.  $209 puts are currently trading under $3 and have 35 days left.  This is a trade recommendation.   Keep in mind that short futures positions can be held until the end of month while June options expire on June 6th. Live cattle open interest increased by 5453 contracts indicating new longs entering the market, which is not surprising, given the current basis spread.  A break in cash could reverse this but no evidence of that yet.

Feeder Cattle:

Yesterday’s index reading was 296.10, up 33 cents and today’s will be up another 21 cents at 296.31.  Although the live cattle board is not as friendly basis-wise, the feeder board is with September contract is only trading around $2 below the current index.  For coverage, I recommend bear put spreads that far out as there is still time to sell on the short put side. At the time of writing this, the September 294 puts could be bought for 9.60 and the $274 puts could be sold for 3.32 giving you a net cost of $6.28 for that window.  This is a trade recommendation.  This push in the futures from the lows in September have made $10-$20 corrections the entire way up, the last one a month ago being the largest.  If yesterday’s lows do not hold, I expect a further correction next week.  Open interest decreased only 62 contracts yesterday.