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(December 2, 1997) LIVE CATTLE/FEEDER CATTLE: With the livestock markets in the post holiday doldrums, the cash cattle and related product markets have found themselves in directionless trade. Many traders came into work this week expecting the cash markets to trade at $66.00, one dollar weaker than last week's $67.00 trade. With that in mind February and April live cattle futures traded to new contract lows and appear to me to have priced $66.00 cash cattle into the futures.
Packers and feedlots started the week off at their typical standoff. Dodge City, KS, with a reported show list of 76,500, offered cattle at $67.00 to $68.00 while packers bid $65.00 to $65.50. By the end of the day Tuesday they reportedly moved 9,500 at $66.00, with a few at $66.50.
Amarillo, TX with a show list of 69,000 had packers bidding $65.00 to $66.00. Feedlots were offering $68.00 to $69.00. By the end of the day they reported moving 8,100 at $67.00 and 22,200 so far for the week.
Talk of snow later in the week has offered support. However, unless the storms are severe I don't expect to see a change in trend, and would use rallies as a selling opportunity. First notice day for December live cattle is December 8th. It comes off the board the 23rd. I would be surprised if the December futures carried more than a $1.50 premium to the cash. With that in mind I would look for chances to sell February live cattle. However, keep your eyes glued on the weather forecasts, because a heavy snow storm can spark a short-term rally and create a marketing hole quickly in the livestock markets.
RECOMMENDATION–With turkey and ham season here, I don't see the February live cattle trading much higher than $69.00 in the near term. Sell rallies in the February live cattle near the $69.00 level. Place your stop above $70.10.
For long- term traders Moore Research came up with this trade. If you had bought the July lean hogs on or about December 8th, 14 out of the last 15 years and held them until March 19th, you would have had a very profitable trade. While this is an outstanding average, there is risk involved. Remember nothing lasts forever.
Les Jones
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