Is it premature to conclude that the bottom is in?
Today’s bullish reaction in cattle futures not surprising considering the record low placement number for September, 98.15%. Wire services indicate the number was the lowest September placement on record, beating last year’s September which was also a record low. Traders were ahead of the report with what appears to be short covering in the December with open interest decreasing there. But with open interest increasing in the Feb. and April contracts, it appears that traders are taking advantage of the rally to extend or increase hedges or downside exposure into next year. The placements number and the resulting reaction could have traders thinking the number reflects an absence of cattle to place in feed yards. Wire service reports from various commentators caution that the cattle are still on pasture lands, but the low prices we have seen recently have not inspired producers to bring them to feed lots for finishing. Technically, cattle futures are bumping into the 50 day moving average. Ability to first close above and then trade above this key technical level, 105.60, would be clear signal of potential trend change. A quick look at the December chart shows cattle have spent only about 30 days above the 50 day moving average so far this year. Wire services also highlight that the Cold Storage number is up almost 5% year over year. This is further evidence that, today’s reaction notwithstanding, the market will still continue to contend with more than adequate supply in the months ahead.
Here are the numbers for the USDA COF as reported by the CME:
On feed September 1 101.5%
Placements during September 98.7%
Marketings during September 105.5%
On Feed October 1 100.5%
Series 3 Licensed
Senior Market Strategist
Joe Nikruto attended Indiana State University and DePaul University in Chicago with a major concentration in economics. "It was during college that I got a job as a runner at the Chicago Board of Trade. I was immediately hooked," he says.
He adds that he also enjoys futures trading because anyone can do it. "Your success depends on how you handle the risk and how much work you are willing to put in. You don't need a big-time Wall Street connection, or a degree from an Ivy League school to get started. Your success largely depends on you and what you put into it."
In 1992, he started as a runner and back office clerk for a very large futures commission merchant (FCM). He moved up to pit clerk, then research associate working on the trading floors directly for a grain and livestock concern based in Memphis. He spent time on various trading desks for a large retail FCM and then became Series 3 registered in 1997. He also helped develop an online trading platform and consulted on development and trading of mechanical trading systems. He has always worked to assist his clients with all types of trading-from option strategies and hedging to complicated mechanical trading systems.
His advisory background includes Floyd Upperman, McMaster, Walter Bressert, Ken Roberts, Tech Guru, Hightower, Helms and Barry Rosen.
As for his involvement with RJO, Nikruto says, "R.J. O'Brien has been in operation for more than 100 years. That is a century of supporting customers. You have to be doing something right for folks who use futures to choose to do business with you for that long."