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Meat Futures

Commodity Introduction

Meat Complex futures consist mainly of Beef and Pork futures, or Cattle and Hogs. Though the animals, their breeding patterns, and dietary needs are dramatically different, the same basic themes tend to dominate trade.

The Meat segement of the commodity markets tend toward strength in the winter months. This is typically attributable towards two factors:

Transporation Difficulties

Feed Availability

Future Strength in the Winter

Livestock, be it Cattle or Hog, tends to be raised in the Central United States. This is because of the proximity to feed sources (both grazing land and corn supplies). Because the production of Livestock tends to be in the Central United States, meat producers rely heavily on inland waterways (such as the Mississippi River and St. Lawrence Seaway) for transporting their goods from production centers to consumption centers. The bulk of the meat consumption in the United States is on the two coasts, as this is where the population is.

During the Winter months, transporation via barge can be "dicey". This tends to create holes in supply, and prices rise. Also adding to winter price strength is the fact that grains are cheap (post harvest), so Livestock producers tend to withhold supply to fatten it with "cheap" grain.

Livestock Markets for Beginners

Live Cattle and Lean Hog futures are perfect markets for beginner traders. These markets tend to have little overnight movement, and hence "slippage" tends to be less. Also, the meat markets tend to trend fairly well, because supply and demand are determined by major macro-economic factors: breeding decisions, consumer tastes, income and population levels, etc. Because supply and demand doesn't change dramatically in short periods of time, prices tend to have prolonged moves when it does trend.

Conclusion

Today's Meat markets offer a tremendous amount of opportunity for the astutue speculator. Be sure to pay close attention to the seasonal tendencies of the Meats, as this segement of the commodity futures markets is extremely seasonal in nature.

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Disclosure of Risk: The risk of loss in trading futures and options can be substantial; therefore, only genuine risk funds should be used. Futures and options ARE not suitable investments for all individuals, and individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option would result in a futures position.

SEASONAL TENDENCIES ARE A COMPOSITE OF SOME OF THE MOST CONSISTENT COMMODITY FUTURES SEASONALS THAT HAVE OCCURRED IN THE PAST 15 YEARS. THERE ARE USUALLY UNDERLYING, FUNDAMENTAL CIRCUMSTANCES THAT OCCUR ANNUALLY THAT TEND TO CAUSE THE FUTURES MARKETS TO REACT IN SIMILAR DIRECTIONAL MANNER DURING A CERTAIN CALENDAR YEAR. EVEN IF A SEASONAL TENDENCY OCCURS IN THE FUTURE, IT MAY NOT RESULT IN A PROFITABLE TRANSACTION AS FEES AND THE TIMING OF THE ENTRY AND LIQUIDATION MAY IMPACT ON THE RESULTS. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT HAS IN THE PAST, OR WILL IN THE FUTURE, ACHIEVE PROFITS USING THESE RECOMMENDATIONS. NO REPRESENTATION IS BEING MADE THAT PRICE PATTERNS WILL RECUR IN THE FUTURE.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO, ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM, IN SPITE OF TRADING LOSSES, ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS, IN GENERAL, OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.