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IRA EPSTEIN & COMPANY
223 West Jackson, 7th Floor, Chicago, Illinois
(November 24, 1997) LIVE CATTLE/FEEDER CATTLE: Traditionally the week of Thanksgiving is one of the slowest weeks of the year. So far, this week has not started any differently. In both Texas and Kansas packers started the week bidding for cash cattle at the $66.00 level while feedlots have offered cash cattle at the $69.00 to $70.00 level. By mid-day the USDA had only reported 28 loads of choice boxed beef sold down $.06 and down $.23 at $104.57 and $103.42, respectively.
Many traders had hoped that the USDA's November “seven state Cattle on Feed report,” released Friday November 14th, would show a decrease in cattle due to last month's blizzard. The report showed a number of cattle were killed during the storm, however, the report was judged neutral to bearish. Traders are in the same boat they were in last week–stuck in a trading range.
The USDA estimated in their monthly seven state Cattle on Feed report that all cattle on feed was at 110% of last year. Most traders were expecting 109.2%. Placements were estimated at 96% with the average estimate at 95.7%. Marketings were put at 107%. Most traders were looking for a number closer to 111%. Other than the marketings number being off, the report was just as generally expected.
Unless packers have orders to fill, most weeks they hold out until Thursday to do their buying. This often leads to a stand off between packers and feedlots. This week will be shortened with only two full trading days. Monday and Tuesday. Wednesday and Friday will be abbreviated sessions with many traders taking the days off. This usually means choppy volatile trade.
Showlists are estimated to be at 78,500 for KS, 65,000 for TX and 86,000 for NE.
The one thing that seems obvious to me is that there is plenty of cattle around. Until now demand has supported the market. However, at this time of year beef is going to get a lot of competition at the retail level from turkey and pork.
RECOMMENDATION–With turkey and ham season here, I don't see the December live cattle trading much higher than $68.00 in the near term. I believe the $66.50 level is a relatively good value, while the $69.00 level is over priced. I am recommending to buy low and sell high. Buy December live cattle near the $66.50 level. Sell December live cattle near the $68.00 level. Place stops below $66.00 and above $69.00.
Les Jones
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