Profit-taking curbs live cattle futures rally
I am Stephen Davis, senior market strategist at Walsh Trading, Inc., Chicago, Illinois. You can reach me at 312-878-2391.
The price of December 2026 live cattle futures today reached its higher level since July 10 but profit-taking dampened the rally.
Last Friday we had a bullish Cattle on Feed report from the United States Department of Agriculture (USDA). The October 1 number came in at 99.6% of last year, compared to the 100.2% estimate. However, prices barely went up.
In an article from the Livestock Marketing Information Center at Colorado State University, Stephen R. Koontz, Ph.D., states that, “More reasonable – but still not much profitable – margins have recently returned to the meatpacking industry. Margins have been closer to breakeven in August and somewhat profitable across September and October. The sell-off in fed cattle prices beginning in June and persistent strength in beef prices since late August made this happen. But the rally in live cattle futures prices since September for contracts in the coming months suggests this strength may be fleeting.”
Watch for this cattle market to get under the 200-day moving average represented by the black line on the chart below.
A trade strategy is to sell December 2026 live cattle at 231.57, good until cancelled (GTC). That is today's high. Place a buy stop 233.0 stop, GTC. The market needs to close above 233.0 to encourage a new round of buying, in my opinion. Once filled on the trade, the profit objective is 227.0. This is a very good risk/reward ratio, in my opinion.
An option trade strategy is to buy December live cattle at 225 put at 1.62. Once filled , sell this 225 put at 3.30. This strategy doubles the money paid for the option.
To discuss trading strategies, contact me anytime. Have an excellent day.
Stephen Davis
Senior Market Strategist
Walsh Trading
Direct 312 878 2391
Toll Free 800 556 9411
sdavis@walshtrading.com
www.walshtrading.com
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