wmeubank@ocp.kcmo.com
COMMODITY INSIGHT
152 Ennis Lake Road, Ennis, Montana
(November 2, 1997) CATTLE: The entire livestock complex should remain locked in a trading range for the next 3 to 6 weeks. February live cattle for instance, should run out of steam at the 70.00 to 71.00 level while support should be uncovered at the 66.00 to 67.00 level.
The hog market is in a similar situation with the upside for February futures being 63.00 to 64.00, while the downside support levels should be 58.50 to 59.50. And February pork bellies should not trade much over 70.00, while finding support down near the 55.00 to 57.00 level.
In the case of cattle, my bias is that of a bull. All my work strongly suggests that a major and long-term low for prices will be in place before the end of December. That is assuming of course, that a low has not already been established. From whatever low is established, cattle prices will work higher into the next century.
In the case of the pork complex, matters are a bit different. Pork producers are apparently increasing the size of their herds and the coming jump in production should be large enough to pressure prices into mid-1998. Based on the Pig Crop report, rallies in hogs should be viewed as a selling opportunity.
Keep in mind however, that hog prices rallied a quick 300 points two weeks ago, when it was announced that Russia bought some frozen U.S. hog carcasses. Even though the outlook for the pork complex is not especially bullish, a sudden and unexpected surge in demand could light a fire under the market.
I see little to do with the cattle and hog markets at this time. My bias is to buy cattle on a break, but I can also uncover reasons to sell cattle on a stiff rally. The same can be said about the hog market as well.
Jerry F. Welch
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