Have Your Steak (and Pay for It, Too!)

From the Desk of Ian Culley @IanCulley

I’ve tried the paleo diet. 

I’ve even gone primal, cutting carbs while increasing fats for long periods of time. 

But I haven’t tried the new all-meat-all-the-time lifestyle. 

Whether you’re a full-on carnivore -- or even if you just enjoy a nice steak once in a while -- it’s time to hedge against rising beef costs using the futures markets.

Check out the chart of feeder cattle futures:

Feeder cattle represent weaned calves making their debut at the feed lots. They range from six to 10 months old and tend to weigh between 600 and 800 pounds.

While these young cows still have weight to put on, from the looks of the weekly chart, they’re planning to eat well this holiday season. 

Feeder cattle futures hit our initial target during summer and have since corrected. Despite the recent pullback, the uptrend remains intact, and overhead supply is well-defined at the year-to-date highs.

If and when feeder cattle break loose above the August pivot high of 190.20, we’re buying on strength toward 246.

It’s easy to like this trade given our bullish outlook for the more mature cattle:

Live cattle futures track cows ready for harvest, weighing between 1,150 and 1,500 pounds. It’s off to the meat packer and dinner table near you for these cows.

They reached our target of 151, paused, and continued higher late last month. I like live cattle futures long if and only if it’s above our former objective, targeting 185.50.

Whether you’re strictly carnivore or enjoy a good steak when it strikes your fancy, it’s a good idea to hedge against rising prices or eat more chicken.

For me, it’s all about making money.

And getting long cattle futures aligns with my goals.

COT Heatmap Highlights

• Commercial hedgers hold their largest net-long coffee position in three years. 
• Commercials are unwinding their gold position, selling over 53,000 contracts this week.
• And commercial hedgers are buying lumber, coming within 3% of their net-long three-year extreme.

Click here to download the All Star Charts COT Heatmap.