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CATTLE - LIVE CATTLE
ALLENDALE, INC. COMMODITY
REVIEW AND OUTLOOK
ING DERIVATIVES CLEARING GLOBAL
ASSET MANAGEMENT
COMMODITY RESOURCE CORPORATION
4506 Prime Parkway, McHenry, Illinois
(June 27, 1997) CATTLE: Closed well for the week on a 310-point rally (this week) in the August feeder contract. Feeders set new contract highs while fats are starting to test good resistance. Fundamentals are for week product demand, and strong feeder demand. They are offsetting each other at this time. Buy a feeder/fat spread to participate.
Rian Powell
195 Route 6A, Suite 6, Orleans, Massachusetts
(July 2, 1997) CATTLE: While an improving chart picture and seasonals suggest that cattle should move higher, supplies may be adequate for current demand. This has not been a good market to buy strength in, but it does appear that the downside is over for now. Low feed costs and carryover buying from the feeders are positive.
RECOMMENDATION–Short-term traders should buy August cattle on dips to 6380-6420 with stops under 6295 or of 50- 100 points. Expect resistance as 6500-6525 is approached, and take profits in that area, or if a bit bolder, look for the 6550 area. Longer-term traders might buy October cattle on dips to the low 6700's with 100 point stops or under 6622. Objective is open. Option traders could contemplate buying August or October calls on dips.
M. Steven Morgan
209 South LaSalle, Chicago, Illinois
(July 3, 1997) CATTLE: August cattle really not much different from the June in that it's still a trading affair. The major highlight to us remains the ability of demand to absorb heavy numbers. The feeder deserves credit for keeping current and keeping weights manageable but beef demand has been outstanding. Partly due to the pork market, the last Pig Crop report also seems to us very positive with high priced pork with us into fall. However, we may not go anywhere. Live prices at 63.00 could see 62.00 post holiday but the low 60's should hold it. Therefore, the August should continue in a $2.00, maybe $3.00 trading range. We favor the buy side at the lower ends.
John W. Kleist
Sagamore Partners, Inc.
575 W Madison, Ste 2607, Chicago, Illinois
(July 02, 1997) LIVE CATTLE: Market activity during the last week in the cattle complex was basically sideways to a bit higher with support stemming from a lower-grain market and steady to firm beef markets. The cash trade during the past week was moderate with prices trading steady at $63.00 as the packers seem to be working on an as need basis. The packers continue to go at the market in a cautious mode as they know the supplies are plentiful enough to keep prices under wraps for the next few weeks. The boxed beef sector was quiet with most categories holding steady from week ago levels in a moderate trade. The steady to firm prices have not dampened demand as retailers continue to be strong buyers which should be a sign that demand will stay at the current levels for the near term if not longer. Overall, market internals remain mixed and as long as demand remains constant through the larger supplies of market-ready cattle that are upon the market now look for these price levels to hold as they are probably cheap enough to keep the market happy. Technically, August live cattle remain in a downtrend; the trend would turn up on a close above $64.90.
FUTURES STRATEGY--Long LCQ at $63.70. Maintain a protective sell stop close only at $61.97.
OPTION STRATEGY--Long LCQ $66.00 call/short LCQ $62.00 put at even. Risk $1.00 on the short LCQ $62.00 put.
Tony Montini
COMMODITY RESOURCE CORPORATION
P.O. Box 8700, Incline Village, Nevada
(July 3, 1997) CATTLE: OUTLOOK–The numbers coming to market remain more than adequate right now. So supply is bearish. Yet our cash sources report robust demand at the retail level. Therefore, demand is bullish. Since the packer can dictate bids, look for supply to overwhelm demand to an extent in the near term. Longer term, toward year end, both supply and demand will turn bullish and the packer will lose control of this market. Look for a two-sided trading affair throughout the summer, with August futures ranging between 62 and 67. Look for prices in the eighties by early 1998.
STRATEGY–FEEDERS: Feeders have been advised to purchase August at the money cattle puts. Your upside profit potential is never limited with puts. Your downside is always protected. Hold onto the puts until you market your cattle.
COW/CALF OPERATORS: Since feed prices remain in a bear market, I still do not recommend hedges in the feeder futures. Prices should remain well supported. Feedlot operators, continue to hold long hedges in deferred feeder futures.
TRADERS: We continue to hold October feeder cattle futures purchased at 74 or less. Raise the risk point to a close under 7740. This will lock in more profits. Our ultimate upside objective is 8550.
George Kleinman
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