ASK CLARA:  Why Hasn't The Drop In Open Interest Crushed Live Cattle

Despite the sharp 82,349-contract liquidation and open interest hitting its lowest point of the year at 325,837, Live Cattle futures haven’t collapsed for a few key reasons:

🧱 1. The Liquidation Has Been Orderly

This isn’t a panic-driven flush. Much of the open interest reduction has been profit-taking and risk-off repositioning, rather than margin-driven selling. It’s likely a mix of funds lightening exposure and hedgers rolling contracts forward.

💵 2. Cash Market Support

The cash cattle trade remains firm, especially in the southern Plains and northern tier, where even with lower volumes, feeders have held strong price levels. This is providing a solid floor for futures.

📉 3. Futures Were Overcrowded

Back on April 2, Live Cattle open interest was extremely crowded at 408K+. The liquidation has simply brought the market back to a more balanced positioning — not a full-scale exodus.

🧮 4. Technical Levels Are Holding

Despite lower momentum, key technical support (like the $193.40 area on June futures) continues to hold. Traders are watching those levels closely, and so far, dip-buying has emerged around support zones.

🔁 5. Rotation, Not Reversal

Some funds are rotating into other commodities or different cattle months — not bailing entirely. Also, as grilling season approaches and carcass weights remain elevated, there's underlying seasonal demand helping absorb the sell-side pressure.

In short: the sharp drop in open interest is not signaling panic — it's more of a controlled unwind in a well-supported market. But if cash cracks or the fundamentals shift (say, packers gain more leverage), then futures could start reacting more sharply.

Let me know if you want a chart or barometer update based on this shift!