Friday's bullish Cattle on Feed report indicated placements of new calves and feeders into feedlots during July were only 2.4% higher than last year. The trade had been expecting a 7.1% increase. This will be mostly bullish for the February contract. The estimate of July marketing's were as expected. There is talk we have a small bump higher in marketing's coming the first two weeks of September. Market ready cattle numbers will tighten from mid September through December. For pricing we feel October live cattle futures may get kicked around a little as we transition into early September, but overall they are getting a little undervalued. Allendale is more concerned about locking in corn costs for feedlots right now than worrying about deferred live cattle hedging at this time. That is also because higher corn prices may be bullish for deferred live cattle prices. We still like the short strangle option position on the October contract (selling both a $112 call and a $105 put) and would ride that to expiration. If October expires from $105 to $112 you keep all $3. The position is not a loser at expiration until prices are below $102.
For speculative trading buy breaks or sell rallies. There was also talk Monday morning of USDA de-listing imports of meat from some Mexican plants.
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