wmeubank@ocp.kcmo.com
COMMODITY INSIGHT
152 Ennis Lake Road, Ennis, Montana
(August 14, 1997) FEEDER CATTLE: The big news in the livestock complex this week was the sharp drop in feeder cattle prices due to the rapid rise in corn prices. When the corn market opened and closed limit-up on Tuesday, feeder cattle prices collapsed to their lowest levels since June 27. However, the following day, feeder cattle prices rose sharply as the upside momentum in corn prices slowed. Nevertheless, the feeder cattle market was not pleased with the rise in corn prices.
If corn prices as well as the other grains rise over the next 8 to 12 months as I fully expect, the impact should be bearish for feeder cattle. Therefore, rallies in feeders as well as live cattle should be viewed as a selling opportunity. Such strategy should not come as a surprise. That is exactly what I have been suggesting for the past several months.
Cattle prices have a great deal of upside potentia over the long run. But my work suggests that such a rise will not take place until after the second quarter of 1998. Until then, the cattle market is a trading range affair with a downward bias.
The pork complex on the other hand, is a different matter. Recent Pig Crop reports have suggested that there is little expansion going on in the pork industry. If pork producers are not increasing production when corn prices were $2.50 a bushel and lower, what will happen in a few months when corn prices are well above $3.00 a bushel? My guess is that hog producers will sit tight and hold production output at current levels. And that's bullish.
My bias towards the pork complex is to buy hard breaks. If corn prices head higher, the oinkers should not be far behind.
Jerry F. Welch
Added to the WWW 08-15-97
Last updated on 08-15-97
Hosted by:
One Crossroads Place
610 West Maple Ave, Suite WWW
Independence, MO 64050
(816) 252-4080
sysop@kcmo.com