soybeans vs live cattle

[bigba]

Hi

I was looking at the Soybean/Corn spread for a while recently (may05 vs may05) and was keen to go short, but it looked better with Soybean vs live cattle so now Im short that (short s long lc). Was very surprised to see volatility in soybeans yday gave a 400gbp swing in pl for a 1gbp spread bet!

Whats the right ratio for this spread. Is this a spread. I figure they feed the soymeal to the live cattle so there is correlation there? Looking at the spread history (daily) it doesnt look that bad.

Any tips on mad spreads like this would be appreciated.

 

[FTSE Beater]

Hi Bigballs

I wouldn't class Soybeans v Cattle as a spread. I don't think they're related enough. The way I see it is "If another BSE scare happened, would it effect Soybeans greatly". I would say not.

These are just my thoughts

 

[TWI]

Soybeans would have some relation as the bean meal goes into cattle feed and as such there is that supply/demand link but the incorporation is much lower than with chicken feed. It would be better to spread some sort of Chicken contract against Soybeans. Not 100% sure out of the grain complex which grain has the highest incorporation in the cattle mix in US but it may be corn.
Initial thoughts are that you are better sticking to the Corn/Wheat, Corn/Soy or Soy/Wheat spread or the meal/bean/oil board-margin.

 

[TWI]

Another note, I would leave these spreads alone on the spreadbetter, their commodity spreads are outrageous and you are up against people trading the market with much tighter prices. Good luck, I think you may need it.

I find trading spreads in the grains a good option for longer term positions as it negates the carry cost which can get nasty if you have a long position for many months.

 

[bigba]

hey guys thanks for the comments. i think i am basically outright short soybeans looking at the spread a second time. i was originally intending to short soybeans vs corn. i was watching this for some time and it looks like the spread has exhausted its rally. but i wonder whether i get out of the entire trade or enter into some corn instead on the way down in the soybeans in order to run it a bit further?

 

[bigba]

hi there

so which brokers can you recommend for soybeans?

irony is i got out of the spread for a profit after it went around 200 ticks offside. live cattle defo not hedge for soybeans!

thanks

 

[FTSE Beater]

Hi Bigballs

I use www.xpresstrade.com and I have used www.refco.com in the past. Both seem to offer a similar level of service

HTH