wmeubank@ocp.kcmo.com
IRA EPSTEIN & COMPANY
223 West Jackson, 7th Floor, Chicago, Illinois
(December 11, 1997) CATTLE: After a rally late last week, traders in the cattle complex returned to work Monday, only to face the disappointment of winter storms that didn't materialize and talk of reduced kills. Both events have bearish implications and helped set the week off on a bearish leg.
In typical fashion the cash cattle started the week at a stand-off. Texas Panhandle packers' bids came in at $64.00 to $65.00 while feedlots offered $68.00 to $69.00 and their showlist is said to be 70,500. Dodge City, Kansas packers bids were at $64.00 to $65.00 while feedlots offered $67.00 to $69.00 and their showlist was reported to be 79,500. In Omaha, Nebraska few sales dribbled out. Nebraska reported 1,500 sales at $66.00 to $67.00 and their showlist is reported to be 89,000.
The USDA reported today 160 loads of fabricated boxed beef sold up $.50 and $.52 at $103.98 and $103.08 for choice and up $.53 and $.88 at $95.40 and $94.72 for select.
With the weakness in the live cattle futures, it appears to me, the trade is trying to price $65.00 cash cattle into the market. However, I believe the packers are short bought after last week and will need to stock up soon. Consequently I wouldn't be surprised to see the cash cattle trade at $66.00, Wednesday. With the weaker cash cattle the February live cattle futures are susceptible to sell-offs considering the premium they carry to the cash. Especially with cattle backing up and gaining weight as reduced kills implies! With this in mind the trade should probably remain bearish until demand picks up or winter storms move in to offer support.
RECOMMENDATION–With the holiday season here and competition from pork, I don't see the February live cattle trading much higher than $68.50 in the near term. Sell rallies in the February live cattle near the $68.00 level. Place your stop above $68.50. For long-term traders Moore Research came up with this spread trade. If you had bought the April live cattle and sold April feeder cattle on or about December 15, 15 out of the last 15 years and held them until April 1, you would have had a very profitable trade! While this is an outstanding average, there is risk involved. Remember nothing lasts forever.
Les Jones
Hogs
|
Cattle
|
Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com