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livestock options recap

By: PJ Quaid, Senior VP, Agricultural Commodities

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The January Cattle on Feed report was largely neutral to slightly supportive. Cattle on feed as of January 1 came in exactly at expectations at 96.8% of last year, marking the lowest January inventory level in nine years and reinforcing the longer-term tightening trend in feeder supplies. December placements were modestly above expectations at 94.6% but still represented the lowest December placement level in a decade, underscoring continued constraints on feeder cattle availability. December marketings were slightly higher than expected at 101.8% and the highest in four years, reflecting aggressive front-end marketings and strong packer pull. Overall, the report confirms smaller inventories, limited placement flow, and ongoing leverage for the fed cattle market as 2026 unfolds.

Today’s dollar weakness and accompanying strength in commodities may partly reflect shifting expectations around future Federal Reserve leadership. Market participants increasingly view Rick Rieder’s emergence as a potential Fed Chair as indicative of a more market-sensitive and growth-aware policy approach, with greater emphasis on financial conditions and less tolerance for prolonged restrictive real rates. That perception supports a softer dollar outlook and is constructive for commodities, which tend to benefit from lower real rate expectations and improved global affordability. While broader macro and positioning factors remain at play, Rieder’s rising profile appears to be reinforcing the move and adding confidence to the trade.

 

German Chancellor Friedrich Merz is pressing the European Union to provisionally implement the long-delayed Mercosur trade agreement, arguing that Europe can no longer afford delays as global trade becomes more fragmented and competitive. While the public case centers on urgency, competitiveness, and democratic legitimacy, the underlying driver is economic self-interest. Germany runs one of the largest trade surpluses with the United States, making preservation of the current trade framework highly advantageous—much like China, which also benefits from the status quo. As U.S. and Chinese trade strategies become more assertive and transactional, surplus economies are moving quickly to lock in market access and supply-chain flexibility. Framed as a strategic necessity for Europe, the Mercosur push is better understood as an effort by Germany to protect its export-led model and reinforce favorable trade dynamics before political and legal resistance can slow the process further.

 

Precious metals extended their surge, with spot silver breaking above $100 an ounce for the first time, underscoring the intensity of the current safe-haven bid across hard assets. Strength in silver is being reinforced by record-setting gains in gold, a weaker U.S. dollar, and rising geopolitical and policy uncertainty, which continue to drive capital toward inflation hedges and stores of value. The move also reflects growing investor concern around monetary credibility, fiscal trajectories, and global trade fragmentation, pushing metals into price discovery mode after years of constrained supply and rising structural demand.

 

January University of Michigan consumer sentiment was revised higher in the final reading, rising to 56.4 from a preliminary 54, modestly above expectations. While sentiment remains historically depressed, the upward revision suggests some stabilization in consumer confidence late in the month. Importantly for markets, one-year inflation expectations edged down to 4.0% from 4.2%, easing concerns that elevated inflation psychology is becoming further entrenched. The combination of firmer sentiment and slightly lower inflation expectations leans marginally supportive for risk assets and helps reinforce the view that disinflation progress, while uneven, has not fully stalled.

 

China’s outreach to Brazil highlights Beijing’s determination to preserve the current multilateral, rules-based global order at a moment when U.S. policy is shifting toward a more bilateral and enforcement-driven approach. China has been a direct and outsized beneficiary of the status quo, leveraging open markets, limited trade enforcement, and global institutions to scale exports, secure critical supply chains, and expand geopolitical influence. Its emphasis on “global unity,” the Global South, and the central role of the UN reflects a clear effort to defend a system that has underpinned its economic rise. Brazil, under Lula, fits naturally into this framework as a key commodity supplier and multilateral advocate. The message is less about ideology and more about preservation — China will actively build coalitions and promote globalist rhetoric to protect an international structure that continues to work decisively in its favor.

 

 

Hogs

Bought 250 Feb 88 puts paid .60 up to .70

Sold 100 June 106/102 put spread @ 1.325

Bought 250 Feb 83 puts paid .10

Bought 400 Feb 84 puts paid .1250

Bought 250 Feb 85 puts paid .175

Bought 350 Oct 70 puts paid .55

Bought 500 June 120 calls paid 1.0750 up to 1.10

Bought 400 April 96 puts paid 3.05 covered 96.125

 

Live Cattle

Bought 200 June 232 calls paid 8.10 up to 8.20

Bought 200 April/June 230/226 put spreads paid 2.50

Bought 250 Feb 224 puts paid .55

Bought 100 April 232/225 put spread v. 245 calls .25 up to .30

Sold 100 April 222 puts @ 2.50

Sold 4000 Feb 224/216 put spread @ .20 down to .15

Sold 3500 April 224/214 put spreads @ 1.20 down to 1.075

Sold 700 April 223 puts @ 2.70 down to 2.10

Sold 200 Feb 230 calls @ 4.05 down to 3.225

Bought 400 Aug 226/204 put spread paid 5.70 up to 5.90

Bought 150 April 216/200 put spread paid .675

 

Feeder Cattle

Sold 1200 May 320/290 put spread @ 2.65 down to 2.475

Lean Hogs          
MonthFuturesChangeStrikeImplied VolChange in IVFutures RangeImplied BERealized BE20D Historic VolDays to Exp
LHG6 88.350-0.1258810.2-0.100.630.570.9817.5326
LHH6 96.175-0.1759618.00.000.851.091.0918.0749
LHJ6 96.175-0.1759617.00.000.851.031.0918.0784
LHK6 99.550-0.22510017.50.100.581.100.9014.34115
LHM6 108.500-0.12510817.20.200.631.180.7811.39144
Live Cattle          
MonthFutures ChangeStrikeImplied VolChange in IVFutures RangeImplied BERealized BE20D Historic VolDays to Exp
LCG6 234.9002.52523513.7-0.305.102.031.9313.0614
LCH6 236.9252.10023714.2-0.305.502.121.9212.8942
LCJ6 236.9252.10023714.4-0.305.502.151.9212.8969
LCK6 232.5001.60023315.2-0.104.882.231.8212.4298
LCM6 232.5001.60023215.2-0.104.882.231.8212.42133
Feeder Cattle         
MonthFutures ChangeStrikeImplied VolChange in IVFutures RangeImplied BERealized BE20D Historic VolDays to Exp
FCF6 364.8001.0753658.8-0.905.072.022.8512.427
FCH6 360.1750.90036016.1-0.207.103.653.6716.1863
FCJ6 358.7500.80035817.0-0.307.003.843.7416.5598
FCK6 356.0500.57535617.2-0.406.903.863.7116.55119
FCQ6 355.3250.40035617.3-0.306.783.873.5715.94217

sources
news bloomberg

options data globex

tables bloomberg 

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