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Animal Protein - Meats Second Quarter Review And The Outlook Q3

Jul. 03, 2017 6:00 AM ETCOW, UBC, LSTK, MOO, DBA, RJA, GSG


  • The best-performing commodities sector of Q2.
  • Live cattle fall 3.04% for the quarter.
  • Feeder cattle move 10.43% higher.
  • Lean hogs explode 38%to the upside.
  • Backwardation in cattle and hogs as the 2017 grilling season gets underway.

The animal protein or meat sector moved 15.13% higher in Q2 after posting a 1.78% gain in Q1. Meats are up 16.87% through the first half of the year after falling 8.80% in 2016. Lean hogs led the sector and were the best performing commodity in all of the U.S. futures markets.

Meats were one of the best performing commodity sectors for 2014 rallying by 14.44%, but they moved lower in 2015 by 21.97% and 8.8% last year. After two straight years of losses, the hog and cattle markets came storming back over the first half of 2017.

Live Cattle Review

Live cattle futures moved 3.04% lower in Q2 and are up only 0.22% over the first six months of 2017 after falling 15.17% in 2016. Active month live cattle futures traded in a range between $1.0315 cents and $1.3890 per pound so far this year and continue to recover after trading below the $1 per pound level in October 2016 after the end of the 2016 grilling season. Live cattle closed the second quarter of the year at $1.1630 per pound basis the August futures contract on June 30, 2017.

Live cattle moved to all-time highs in the aftermath of the drought in 2012. When grain prices exploded to all-time highs that year, animal protein producers could not afford to feed their herds. As feed prices rose, producers sent the animals to processing plants early to avoid losses because of high feed costs. It takes 18 to 24 months to raise a head of cattle, thus began the great cattle bull market that reached highs in 2014. The population of planet Earth now stands at over 7.40 billion people. In Asia, diets have changed as wealth has grown. A traditional rice-based diet now includes more complex proteins, which has increased demand for beef and pork in the region. In 2015 and

This article was written by

Andrew Hecht profile picture
Weekly commodities commentary and calls, from a Wall Street veteran
Andy Hecht is a sought-after commodity and futures trader, an options expert and analyst. He is the #2 ranked author on Seeking Alpha in both the commodities and precious metals categories. He is also the author of the weekly Hecht Commodity Report on Marketplace - the most comprehensive, deep-dive commodities report available on Seeking Alpha.

Andy spent nearly 35 years on Wall Street, including two decades on the trading desk of Phillip Brothers, which became Salomon Brothers and ultimately part of Citigroup.

Over the past two decades, he has researched, structured and executed some of the largest trades ever made, involving massive quantities of precious metals and bulk commodities.

Andy understands the market in a way many traders can’t imagine. He’s booked vessels, armored cars, and trains to transport and store a broad range of commodities. And he’s worked directly with The United Nations and the legendary trading group Phibro.

Today, Andy remains in close contact with sources around the world and his network of traders.

“I have a vast Rolodex of information in my head… so many bull and bear markets. When something happens, I don’t have to think. I just react. History does tend to repeat itself over and over.”

His friends and mentors include highly regarded energy and precious metals traders, supply line specialists and international shipping companies that give him vast insight into the market.

Andy’s writing and analysis are on many market-based websites including CQG. Andy lectures at colleges and Universities. He also contributes to Traders Magazine. He consults for companies involved in producing and consuming commodities. Andy’s first book How to Make Money with Commodities, published by McGraw-Hill was released in 2013 and has received excellent reviews. Andy held a Series 3 and Series 30 license from the National Futures Association and a collaborator and strategist with hedge funds. Andy is the commodity expert for the website about.com and blogs on his own site dynamiccommodities.com. He is a frequent contributor on Stock News- https://stocknews.com/authors/?author=andrew-hecht

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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