wmeubank@ocp.kcmo.com
COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6,
Orleans, Massachusetts
(June 11, 1997) LIVE CATTLE: Evening up for Friday's Cattle on Feed report was the main feature after new near-term lows on Monday. Cattle supplies are expected to be shown as more than ample. Cash markets are expected to remain weak, as well as boxed beef prices.
However, much of this is already priced into the market, so there is a potential for a bullish surprise if cash prices are better than expected. Some believe that the funds have done most of their liquidating, but open interest in the June is still high, and suggests the potential for further liquidation. The upcoming cattle on feed may point out that deferred cattle supplies are indeed tight, and traders should keep an eye out for signs of bottoming in October cattle on out. As is always the case, how the market reacts to the report is more important than what the report said.
RECOMMENDATION--More aggressive traders could continue sell August cattle on rallies to 6450-6480 with stops over 6525 or of 100 points. Support lies near 6295. Longer-term traders might hold out for an objective of the mid 6200's. At this point, I am looking for signs of a bottom, and would buy August on any reversal from new lows. Long term, I suspect much higher prices are in store.
However, that is very long term. Long-term option traders should keep an eye on October or December or February cattle for opportunities for buying calls or futures.
M. Steven Morgan
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