Grain Spreads: Cattle vs Grain

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Late 3^rd/4^th Quarter 2026 Cattle vs Grain Hedges

Here are a few of my trade ideas for those who need protection or want exposure to the downside in livestock. I’m not married to these option strikes or months here specifically, but I think a further out strategy should be considered. They are a starting point or ice breaker for a discussion. Cattle prices could remain elevated throughout 2026, but I am combining them with long grain positions to offset costs to entry, where one collects upon entry. Nothing Goes UP or Down forever! I see a flip at some point where input costs go higher while the cattle futures board eventually moves lower. Timing? I want to go as far out on the calendar as possible, deep into 2026.  High prices take care of high prices in most cases and like 2025, we think something will enter into the market as it’s a midterm election year with ramifications on not only ongoing trade disputes but war now with Iran. These issues will in our view be a big concern as it relates to affordability. Should the ripple effects remain deeper into 2026, we could see a pullback late 3^rd quarter/early 4^th quarter in beef prices in our opinion. 

There is also the Mexico aspect to this equation as US Ag Secretary Brooke Rollins has said she wants to open the border. There is speculation that Rollins will look at Arizona as the first port to open as it is the furthest from the nearest screwworm outbreak. She is scheduled to be in Arizona this week and many are guessing she will use this visit to talk about the border. Mexico is refurbishing a fruit fly facility, and it is expected to be screwworm fly ready by July. It is expected to produce 100 million sterile male flies to assist in the battle with the screwworm. If this introduction is successful in pushing the screwworm further south, the pressure to increase the number of cattle into the US will increase. Summer has usually been a slow time for Mexican cattle coming into the US but with no cattle coming into the US now any border decision could temporarily increase the flow of cattle into the US counter seasonally. The numbers will start slow and be deliberate as the US will be extremely careful with this potential political time-bomb. Texas needs the Mexican cattle as the industry is struggling along with other businesses that rely on the cattle industry. If the border opens and cattle starts to arrive in the US without incident, then we could see the feeder market loosen as we head into the 3^rd quarter of the year. Remember, the border is closed and may not open until the fly situation improves. Arizona may be the only port to open this year if it opens. Texas is too close to the nearest screwworm outbreak, and we can only hope the fly doesn’t arrive in the US this year. Per the latest CFTC data, managed money is long 136.6K live cattle futures and options. The record net long is 156.9K. Managed Money is long 21.1K feeder cattle futures and options, with the record long being 37.8K. 

The war with Iran, has created and could continue to create a supply side shock for fuel prices. We have seen spot Brent and NYMEX crude trading well above $100 per barrel since the conflict started. Aside from this, Russia and Ukraine have kept up the attacks on each other, with Ukraine targeting Russian oil refinery and seaport export terminals. Since the war started, there hasn’t been a true accounting of estimated damages to refineries and pipelines in the Middle East, while Iran endures a blockade of their ports and for now their production is offline. It is way easier to shut down these facilities than to start them back up. One doesn’t just snap their fingers and/or flip on a switch. It takes time to turn back relying on a process. Higher energy prices inevitably eat into disposable incomes. While the consumer has been resilient, at some point we may see a pullback in demand at some point. 

December 2026 Live Cattle

Buy the December Live Cattle 234/200 put spread, for 700 points or $ 2800 per spread. 

At the same time sell the January 2027 soymeal 4.00/3.50 put spread for a $4500 collection.

Collection upon entry is $1700 for 1 spread package less trade costs and fees.

Maximum risk is $3300 plus all commissions and fees.

Margin requirement -$1925.00

Maximum collection if all strikes finish in the money -$19,800.00

Feeder Cattle Hedges

Buy the October 2026 Feeder cattle 350 put and sell, the Oct feeder cattle 310 put for 750 points or $3500 per spread plus commissions and fees

Sell the March 27 soybean 13/12 put spread for 85 cents for a $4250.00 collection per spread less trade costs and fees.

Collection upon entry on this spread package is $750.00 less trade costs and fees.

Maximum risk is $4250 plus trade costs and fees.

Margin -$2600

Maximum collection -$24250.00 if all strikes finish in the money at expiration.

Sean Lusk                                                                                              Ben DiCostanzo 

Vice President Commercial Hedging Division                                Senior Livestock Analyst

Walsh Trading                                                                                      Walsh Trading, Inc.

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