Grain Spreads: Cattle vs Grain Hedge Plan

Late 3^rd/4^th quarter 2026 cattle vs grain hedges

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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 through much of 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 trade 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. 

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 then, prices have moderated below 80.00 per barrel. Aside from this, Russia and Ukraine have kept up the attacks on each other, with Ukraine targeting Russian 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, as of this post sill endures a blockade and for now and their production remains offline, despite and electronic signature of an MOU. It is way easier to shut down these facilities than to start them back up. One doesn’t just snap their fingers and turn on a switch. Higher energy prices and for that matter grocery store 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. 

Most importantly, we have midterm elections are coming in early November. Be prepared to hear a lot of the “A” word. Affordability will be echoed up until the midterm elections ad nauseum. We have seen the current administration, along with President Trump and Ag Secretary Rollins take some shots across the bow against high beef prices, regarding rancher profitability, border reopening’s, a cessation of tariffs and levies on beef imports, and an overall intent to lower prices. Power to maintain control of both houses could mean a no holds bar approach to lower prices by any means necessary. For that reason, take a look at the hedge gameplan presented. 

December 2026 Live Cattle

Buy the October Live Cattle 240/210 put spread, for 700 points or $ 2800 per spread. 

At the same time sell the March 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 November 2026 Feeder cattle 350.000 put and sell, the Oct feeder cattle 310.000 put for 750 points or $3500 per spread plus commissions and fees

Sell the May 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

Vice President Commercial Hedging Division

Walsh Trading

312 957 8103

888 391 7894 toll free

312 256 0109 fax

slusk@walshtrading.com

www.walshtrading.com

Walsh Trading

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Chicago, Il 60606

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