CATTLEUSA DRIVE - Wednesday, January 29th

A very common question right now- "How do I hedge cattle that are $5 or $10 losers based on deferred futures?" Or another common question is "What should I buy since they're all un-hedgeable?" Simple answer to both questions is there is no perfect answer. I've looked at several strategies using options, futures, and LRP's, but if the cattle are underwater, you're not going to like it. Don't get me wrong, we've all fed that one pen that we wish we would have hedged a small loss instead of taking a large loss, but to be in this business you have to be optimistic. So set floors at break even or better, and sell/hedge them when you've achieved your profit target. For those of you that think we're near the top and want coverage, even on a small loss, I would consider the following.

• Buy the LRP's since they're your cheapest option, and you don't have to pay the premium today. I would recommend only protecting a percentage of them, that way if you do 50% today and the market rallies this week, you can add the other 50% coverage at better levels.

• If the market does rally to a level where you can then protect break evens or profit, call us to roll your LRP's up.

— To roll an LRP up, you would sell a put option at your LRP strike price, and buy a higher strike put option. For instance, your first LRP is at 194 ending in April, you could sell a 194 April put option and buy a 204 April put option at a cost of ~$2.30. You gained $10 in coverage and now have the cattle covered at a much higher, possibly profitable, level than you originally had.

— I would normally recommend selling a call option at the same time to offset the additional premium, but you can imagine how those have been treating me in this wildly bullish environment.

Kyle, pay attention!!! The barns are mostly steady this week, so it's a little risky telling you to lock the gates. But given the fact that last week's spread between the barns and country cash was way too wide, I'm inclined to tell you to lock the gates and ask for higher money this week. To go along with that, the South is expecting another winter blast this weekend, so they're going to be unwilling sellers at steady money. At these levels Kyle, I'm inclined to quit giving recommendations on cash cattle, but have you seen the boxes? Kyle, it sounds to me like $215 in the North is a good round number, and maybe the South will hold for $210 or more. Darn it Kyle, lock the gates and let's push this cash higher!!!

-Fat cattle kill at 124,000 vs 124,000 a week ago and 127,000 a year ago

-Choice boxes up 2.37 to $332.45 and select up 1.41 to $321.96 for a spread of 10.49 on 126 loads

-CME feeder index for 1/24 came in at $277.93

-LRP’s ending last week settled at $210.22

-Hog kill at 489,000 vs 482,000 a week ago and 492,000 a year ago.

-Afternoon Pork reported down .30 at $92.86 on 335 loads

-CME lean hog index on 1/24 reported at 81.94

-CME pork cutout index on 1/27 reported at 91.51

-LRP’s ending 1/28 settled at approximately $82.14

We are now in the third cycle of this year’s weather pattern, and this edition of our report is designed to showcase the incredible reliability of the Lezak Recurring Cycle (LRC). This highlights the precision of our forecasts and sheds light on the complexities involved in making long-term predictions, which are crucial for your agricultural and planning needs.

Examine the comparison displayed on the images above. The top image captures the actual conditions over North America and surrounding areas at the 500 mb level on November 7, 2024. The bottom images is the forecasted atmospheric level for January 30, 2025.

These dates, 84 days apart, align perfectly with a 42-day cycle, demonstrating how this year’s weather pattern is cycling within the 38-45 day range, centered around 40-42 days.

Notice how nearly every major and minor atmospheric feature aligns in this map-to-map comparison. This precise alignment is a testament to the predictive strength of the LRC model.