COMMODITY RESOURCE CORPORATION
400 South Fourth Street,
Minneapolis, Minnesota

(June 12, 1997) CATTLE: OUTLOOK--This remains a two-tiered market; the now and the later. The now-market has to absorb up to 10% more cattle than a year ago. Feeders are doing a good job in keeping current, and the demand appears brisk, but the supply is somewhat burdensome. I do not look for a price collapse, but no real rallies are in the cards either. I still believe the longer-term outlook is extremely bullish. We keep hearing reports of tight availability of lighter weight feeder cattle. By the end of the year cash prices could be over eighty dollars, my opinion, maybe all new highs by early '88. As the near futures months are falling, note the December and February are holding like a rock. This is a longer term bullish sign.

STRATEGY--FEEDERS: We suggest the purchase of August at the money cattle puts. No hedges are suggested beyond this date. Your upside is never limited with puts. The correct strategy is to hold onto the puts until you market you cattle. If prices are lower you are protected to some extent as the puts gain value. If prices are higher you abandon the puts and sell at the higher cash money.

COW/CALF OPERATORS: The advice remains the same here. We do not recommend hedges in the feeder futures based on tight supplies.

Prices should remain well supported throughout the year. Feedlot operators, continue to hold long hedges in deferred feeder futures.

TRADERS: We continue to recommend holding October feeder cattle futures purchased at 74 or less. The risk point has been raised to a close under 7400. This is a longer-term trade. Continue to leave the upside objective open.

George Kleinman

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