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GROWTH FINANCIAL, LLC.
141 W. Jackson St., Ste. 2838, Chicago, Illinois
800-464-4564(November 24, 1999) CATTLE: Cattle futures were again choppy during the past week as uncertainty about what price cash cattle would trade at and a so called bearish cattle on feed report kept a cap on the complex. Cash cattle trade was slow up to this writing, but it appears that producers will get at least $71.00, which they ended up getting last week despite another round of packer rhetoric during the week about cutting the kills due to a weak product market which was hampering their bottom line, but the funny thing is that the product market actually rallied again this week. Supply continues to tighten as evident by lower showlists and it appears this will be the trend for awhile as most producers are selling green cattle which has been magnified by the lower tonnage figures. Boxed beef prices were strong up and average of $2.00 as the undertone remained firm with strong demand continuing to keep pace even with a surge in price. As long as retailers keep moving supply they probably will not mind paying at least steady if not higher for product. Features have not been all that strong as the spotlight moved to turkey and ham for the upcoming holiday, but brisk sales appear to be keeping pace at the consumer level. Overall, market internals are strong as the undertone continues to be firm with producers remaining very current giving the complex plenty of confidence. The so called bearish cattle on feed report was really not all that bad when one starts taking it apart as the heavy placement which seemed to be a concern were in the light weight categories. With the good part of the placements being calves do not be surprised to see theses numbers lessen as time goes by as many producers have had a tough time keeping these critters alive and it would not be a reach to think that a 3% to 4% death loss has occurred. Technically, LCZ is in an uptrend; the trend would turn back down on a close below $68.75.
FUTURES STRATEGY--Long LCZ at $69.00. Maintain a protective sell stop close only at $67.20.
OPTIONS STRATEGY--Long LCZ $71.00 calls and short LCZ $67.00 puts at even.
Tony Montini