Live cattle spreads are still looking great, seasonal patterns are tight and correlated. Front month live cattle could see a rally in the coming days to establish a higher low, but we think any rally is a selling opportunity.
Trade Idea: Short August/December Live Cattle- Seasonally we couldn’t ask for a better spread to trade. The 5 year and 15 year averages are very correlated and tight, with correlation in the upper 90’s. Out of the last 15 years this spread has traded lower 14 out of 15 years, and the average low price over the last 15 year average is $-12.00. Now that -12.00 average low price is not a profit target, but more of a idea of what could happen. Fundamentally speaking we remain bearish on live cattle prices, and today the USDA WASDE report will come out which will give us an updated view on the fundamentals. Technically we like selling this spread around $-2.50.
Win%———93% 14 out of the last 15 years
Days in Trade———55