COMMODITY REVIEW AND OUTLOOK

195 Route 6A, Suite 6, Orleans, Massachusetts

(August 14, 1997) FEEDER CATTLE: Feeder cattle rallied based on the lackluster performance of the corn market. After this week's selloff the market deserved a bounce. Support also came from ideas that corn, live cattle and feeders all in this area can lead to profitable opportunities in the cash market. While good demand and tight feeder supplies have supported the market, and longer term I like the long side of feeders quite a bit, the prospect of higher feed prices at a time when it is just over break-even sounds to me like it is questionable that one can make money buying feeders, feeding them and selling them as fat cattle. Especially when it appears that higher feed costs are a near certainty. I remain a bear unless deferred cattle can sustain a good move higher.

RECOMMENDATION–Support basis October is near 7965, 7920, 7880-7865, 7800 and the low 7700's. The market has signaled a move to at least the low 7700's, possibly the low 7600's. Resistance is near the 8290's, 8250, and the low 8200's, as well as near 8170. Aggressive traders might sell October feeders in the mid-low 8100's with 50-100 point stops or over 8170. Objective is open, but it may not be advisable to be in for the report. More conservative traders should stay on the sidelines for now or be out for the report. Option traders should be on the sidelines right now. Feeders are thinly traded, so they may not be for everyone.

M. Steven Morgan

Added to the WWW 08-15-97
Last updated on 08-15-97

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