The cattle markets maintained their volatile ways yesterday, with most-active Feb live and Jan feeder cattle trading in $5 and $6 ranges within the first 25 minutes of the session. Futures settled higher and again did so on large trade volume but barely any change at all in open interest, a combo that has become common in recent weeks. The big volume, small average trade size, and nary a change in open interest sure gives the look of a market dominated by high frequency traders, many of which are in and out in the same session. Maybe not coincidentally, the CFTC has just announced an open meeting on Nov 24th to discuss “automated trading” regulations, perhaps finally acknowledging the HFT’s role in our markets. Lost in the volatility and limit moves of late has been a continued improvement in forward crush margins as the feeder-fat spread continues to correct lower. Several forward crush spreads have moved $100/head since the first of August. A rebuilding herd and increased feeder cattle availability should help support crush spreads and forward feeding margins well into 2016.
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