|
| If you think there is enough upward price movement to cover the put cost, it would be a good idea. In general though the cost of the put isn't random and often struggles to pay for itself, unless something really exciting happens. Cattle numbers are still low, but the economy doesn't appear to be ready to support high priced anything (it's funny when reports suggest more cattle on feed, but fail to mention there still at low numbers). The unknown is fund buying. I know it's brought the hogs up from the basement. I think they own large positions in about every ag sector.
I wonder if the fund buying scenerio is to sell something really hard when there is really bad news (h1n1) to cause the market to go to far down. The price eventually gets low enough to start killing off production - you can only raise animals at a loss for so long. Then supply starts dropping. At some point they buy back in and start the momemtum going upward. Of course this upward momentum is occuring before the total supply cut has been realized. This way there is an extra 'kicker' when reports finally show cuts even deeper than thought. The talking heads act like folks get in and out of livestock on a weekly basis and that contraction or expansion can occur in the space of a few months. Naturally the shortest is birds at 3 months, but larger animals take much longer - I don't think we've actually realized the hog production cuts yet (last litters of liquidated sows are just now getting close to market weight). This works perfectly into the fund managers plans if they were patient. The talking heads will start screaming about unexpected low numbers and give the price another boost. Good time to slowly sell positions during the rally. Now if 'you really want to catch fish' find a way to get consumers to believe 'happy days are here again' and get a bump in demand resulting higher prices and potentially high prices for a while. This is not a conspiracy theory, but reality when you can influence so much of a market and you are in a position to take advantage of problems (like h1n1, poor economy, etc).
Beef is still waiting for the 'happy days are here again' event which could hinge on elections, maybe some smart policy or US companies actually start making stuff everyone wants at good prices and hiring folks. Still $1 is pretty good money if the feed program was hedged right. In hogs the money is far better than it was, but most of any profits are going to pay for previous losses - everyone owe's a bunch of money (big to small).
Thanks,
Pat | |
|
Where do you feel Fat cattle prices are headed?
