CME Traders Reluctant To Keep Pace With Cash Market

February was the last time I gave my advice in this column. In February, I wrote about record high prices, strong demand and uncertainty that tariffs might bring.

In June, cash prices were on fire for both feeders and fats. The biggest issue producers are talking about to me now is having locked in prices at $190.00 on contracts or hedges and having to deliver in a 235.00 cash market.

The hedgers at least are enjoying historically strong basis to take away some of the sting. While that basis is great for ready cattle, it is frustrating to see the futures market trailing the cash by $20, when you want to protect new placements. It can be discouraging to think about the money left on the table, and the temptation to not use good risk management gets strong.

Supplies should remain tight throughout the rest of the year, and as long as the economy remains strong, beef prices should also remain strong. If you can tolerate some risk, now may be the time to leave some of your production open for the cash market.

But make no mistake, this bull market will eventually come to an end so please don’t completely abandon your risk management strategies. Perhaps you should look at some new ones.

With CME traders reluctant to keep pace with cash markets, this could be a good time to consider hedging instead of contracting to take advantage of this positive basis. It looks like the futures market will continue to lag behind the cash until cattle inventories rebuild.

So far the tariffs have not been detrimental to beef prices, but if deals are not made soon the economy could be affected.
Lots to watch in the year to come.

I think price swings will continue, your best strategy is to figure your breakeven and set a strike price so you don’t miss a run up in the market.