Crude Oil Wrapped Bacon (and Beef)

The first month of 2015 has been anything but dull in the futures markets. Many point to Crude’s Unbelievable sell off, or the Swiss Franc shooting up around 25% against the U.S. Dollar, but what we’re noticing down here on the front lines of commodity trading is the meat markets big run up might finally be coming to an end.

(Disclaimer: Past performance is not necessarily indicative of future results)

The meat markets are some of the more interesting futures markets to discuss, because there are so many factors outside of the usual stuff covered on CNBC that can affect prices. One example of why the cattle market is oversold via cattlenetwork.

“While most agree that cattle futures are oversold, the futures weakness creates a sharp contrast to high feedlot breakevens, which will continue rising for another month or two.  Feedlots are facing negative margins with cash prices lower than breakevens and even weaker Live Cattle futures contributing to moderate feeder cattle demand at this time.”

Meanwhile, there was debate over whether a recent policy “Country-of-Origin-Labeling” or COOL  handed down by the U.S.D.A. is what halted demand for higher priced meat products. The explanation via Farm Futures.

“COOL did not cause the declines in livestock exports to the United States, which largely coincided with a substantial global economic downturn that sapped demand for more expensive meat products,” notes the study, authored by C. Robert Taylor, Ph.D., an Auburn University Professor. The study, released by the U.S. Cattlemen’s Association, builds on an ongoing dispute between the U.S. and Canada and Mexico regarding COOL. The two countries say it violates World Trade Organization regulations.

Whatever is happening in the feedlots and international trade agreements – it’s hard to ignore that a big part of what’s going on is strength in the US Dollar. Meats, like Oil and nearly every other commodity, are priced in US Dollars.  That means, all else being equal – a rise in the Dollar would mean a decline in beef prices to keep equilibrium. This doesn’t make sense to non economists, and those in the US, who don’t usually think of the dollars in their pocket appreciating or depreciating. But it’s there nonetheless… with a strengthened dollar buying more meat, oil, and other goods than it did a year ago.

An interesting end note… Live Cattle is coming off of its highs in a more volatile way than normal. Since it’s high in December, Live Cattle is down -13.00% {Past performance is not necessarily indicative of future results}, and has experienced 3 limit down moves since the start of the year, (4 since December). Imagine what that percentage could be without limit moves?

While trend followers enjoyed the move up in 2014, and have been slowly recognizing this move down… this market is really the purview of Specialty Traders and Ag Traders. Download our complimentary Ag Traders Whitepaper and Specialty Traders Whitepaper, to learn more about how these traders use their experience in the field (literally, in a field with boots on) to ascertain what all the different data points mean for specific markets.

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.