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Livestock Providing an Opportunity
A recent price recovery in both live cattle and lean hog futures contracts is offering an opportunity for producers to lock in better prices than existed just a few weeks ago. Many farmers may have held little hope for a price recovery. Expectations for big inventory and cheap feed usually suggest that cattle and hog numbers will increase, which leads to steady to lower prices. However, a weaker U.S. dollar and strong speculative buying, as well as technical short covering, have provided a lift in both commodities, proving an opportunity for producers to shift risk.
This week the February cattle contract placed a double top on the charts, with futures rallying $10.00 since the end of August, matching the June 6 high of $122.75. April live cattle futures rallied to new contract highs, also experiencing a similar type rally of more than $12.00. Hog futures in 2018 summer months are offering excellent value, with both the June and July contracts breaching the $80.00 level and scoring new contract highs. This is an impressive rally off of recent lows established near $74.00 at the end of August.
Cheap and readily available feed supplies will lead to herd expansion. There have been five large crops since the drought shortened the 2012 crop. This suggests livestock herds have been building. View the recent rally as a bonus. Prices are currently higher than many believe they should be. Don't let this opportunity escape. Good demand and a strong flow of investment money into livestock have been supportive. Yet, both of these can ebb and flow rather quickly. Should money flow out of livestock, demand softens, or both, prices could move down just as quickly as, or even faster than, they moved up.
The bottom line is that livestock producers should not fall asleep at the switch. Inventory management is a critical component of any livestock operation. Your inventory has just gained value. Make sure you keep it.
If you have questions or comments contact Top Farmer at 1-800-TOPFARM, ext. 129.
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Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Hypothetical performance results have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. No representation is being made that scenario planning, strategy or discipline will guarantee success or profits. The data contained herein is believed to be drawn from reliable sources but cannot be guaranteed. Reproduction of this information without prior written permission is prohibited. This material has been prepared by a sales or trading employee or agent of Stewart-Peterson and is, or is in the nature of, a solicitation. Any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to Stewart-Peterson. Stewart-Peterson refers to Stewart-Peterson Group Inc. and Stewart-Peterson Inc. Stewart-Peterson Group Inc. is registered with the Commodity Futures Trading Commission (CFTC) as an introducing broker and is a member of National Futures Association. Stewart-Peterson Inc. is a publishing company. A customer may have relationships with both companies. Accordingly this email is sent on behalf of the company or companies providing the services discussed in the email.