Livestock –
If it felt yesterday that I was picking on cattle hedgers for being short as the market went higher, I apologize. Today I want to present the spec positioning as shown on the latest COT report. The attached chart shows the percentage of open interest that MM and index traders comprise in cattle. As you can see, this is near its highest level since the previously mentioned 2014 futures rally. Intuitively, it makes complete sense that a large hedge position from the feeder would likely be offset to a large degree by a large spec long position. Still I think it is worth noting how big the position is. If I chose to produce a chart showing just the total MM and index trader net position, the total would be larger than what we saw in 2014 (larger aggregate open interest keeps the % lower).
So while in 2014 it was the feeder that ended up being squeezed (higher) it doesn’t necessarily have to end up that way this time. Placement data certainly indicates summer supplies will be increasing and it sounds like early estimates for March placement figures are impressive. So, to repeat, just because positioning is set up similarly to 2014, it doesn’t mean the market action will be the same.
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