Walsh Cattle Opportunities - Pure Hedge Division
Feeder cattle closed limit down to 340.375, down -9.25 in the September contract. January feeders were limit down to 330.800. Live cattle were -6.27 1/2 lower to 225.950 in the October contract.
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A rumor came out that screwworm was found in Oklahoma this morning. At this time the presence of screwworm in Oklahoma is UNCONFIRMED. This comes after the border was shut down again on July 10 after the brief reopening on July 7. Feeder cattle are up 26.24% year-to-date, while live cattle are up 25.72%.
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Feeder cattle were limit down with lower open interest, indicating the selloff has more to do with profit taking and longs liquidating their positions than new short positions being bought.
Cattle can trade lower on headlines or rumors like screwworm concerns due to initial uncertainty. One outcome is that exports decline, increasing short term supply. Another potential outcome is that retail demand suffers due to buyers choosing other meat than wholesale beef. What’s more likely is that supply is tightened further due to herd loss and a slower supply chain. The Cattle Inventory report, in July, showed the lowest herd size in history. Cash trade continues to surge higher. For the week ending August 1, 500-600 pound steers were recorded at $443.50 in Nebraska, up 36.1% above last year and $442.56 in the southern Plains. Prices in the western part of the country have seen massive gains in the cash market, with 5-weight prices in South Dakota jumping close to $40 per cwt week-over-week.
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AM boxed beef was mixed with Choice-grade cutout down -1.16 to 377.78 and Select up +0.96 to 354.71. PM boxed beef was down -.10 to 378.84 for Choice-grade and Select was up +1.34 to 355.09. Yesterday the feeder cattle index was at 337.21, compared to 335.82 a week ago. Keep an eye on the feeder cattle index, the futures sometimes see pullbacks when they trade 9-16 handles above the index.
To me, the drop in cattle prices, today, looks like a buying a buying opportunity depending on how the market opens on Monday. The options are expensive due to volatility, I would recommend buying the futures or buying call spreads to lower the cost of the trade. If you have cattle you’re looking to hedge, you can find Wednesday’s article Here with hedging ideas.
Please consider the following opportunities:
LIVE CATTLE
Buy 1 October’25 227 Call 6.150
Sell 1 December’25 235 Call 6.50
Price: 0.35
Cost: $140/Trade Package, Plus Fees and Commissions
September’25 Feeder Cattle Options Expire 9/25/25 (50 Days)
MAXIMUM LOSS: LIMITED
I would look to exit this position around 0.70 or $280/Trade Package.
FEEDER CATTLE
Buy 1 January’26 350 Call 9.67 1/2
Sell 1 January’26 360 Call 6.67 1/2
Price: 3.0
Cost: $1,500/Trade Package, Plus Fees and Commissions
September’25 Feeder Cattle Options Expire 9/25/25 (50 Days)
MAXIMUM LOSS: LIMITED
I would look to exit this position around 6.0 or $3,000/Trade Package.
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Hans Schmit, Walsh Trading
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hschmit@walshtrading.com www.walshtrading.com
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