IRA EPSTEIN & COMPANY
223 West Jackson, 7th Floor, Chicago, Illinois
312-207-1800(March 14, 2000) CATTLE: Last week live cattle futures consolidated on the chart as skyrocketing boxed beef values and stronger than expected cash cattle trade raised concerns in futures traders that the market had perhaps rallied too far too fast. Similar concerns and firmer grain prices in part weighed on the feeder cattle futures.
Traders started the week with forecasts for $71.00 cash cattle trade in the central and southern plains. Profit taking and the start of the "Goldman Roll" weighed on the April live cattle early in the week. Many traders like to jump on the bandwagon as Goldman Sachs livestock fund rolls out of their front month livestock futures and into deferred contracts. The April live cattle futures found support at the top of the gap on the chart at the $72.25 level.
Following the previous week's cash cattle trade at the $70.50 level, $71.00 seemed like a logical expectation for the cash market. However boxed beef prices soared most of the week with Light Choice finishing the week over $119.00! As a result, packers in the central and southern plains were able to raise their bids to the $72.00 level and heavy trade was seen at that price. The April live cattle rallied to test the contract high at $73.50 but was only able to trade as high as $73.30 as profit taking and concerns that the market had rallied too far, too fast pressured the market. The April live cattle traded as low as $72.20 but rebounded as $72.00 cash and soaring boxed beef values boosted the market. However, the last two times the Light Choice boxed beef price neared $120.00, the market corrected to the downside as retailers found the wholesale beef too pricey. Traders were said to be willing to give the April live cattle a chance, however they seem to be reluctant to go long at these elevated levels.
The USDA reported that for the week ended March 9th, cash trade was heavy. Amarillo, TX reported week to date sales of 115,600 head at $72.00. 49,000 were reported as formulated. Dodge City, KS reported week to date sales of 81,900 head at $72.00. 35,200 of those were reported as either previously contracted or formulated. Kearney, NE reported week to date sales of 120,600 head from mostly $113.00 to $114.00 on a dressed basis.
Boxed beef values soared last week. At mid-day Friday Light Choice was at $192.49. Heavy Choice was at $119.06. Light Select was at $113.56 and Heavy Select was at $113.47.
RECOMMENDATIONS--Retailers continued to buy boxed beef with a vengeance last week. The fly in the ointment still could be "Lent." However, I am still seeing no indications of a slowdown in demand at this time. Buy April live cattle at $71.60. Also, on rallies, continue to look to buy the April $73.00 put options at $1.00 o.b.
Les Jones
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