COMMODITY INFORMATION SYSTEMS
TECHNICAL COMMENTS
“Market Ready” Cattle To Expand!
The nearby contract in cattle has traded in a sideways pattern since October of last year. The upper boundary ranges from 69.00 to 70.80 and the lower boundary ranges between 62.80 and 63.30. The most recent advance pushed into the upper range and appears to be failing. Stochastics work best in range bound markets, as illustrated over the past year. A lower close next week will provide a new signal in stochastics from an overbought condition. This would indicate potential for a major decline and test of the lower support boundary.
Expectations for cheap corn and strong cattle prices have led to record large feedlot placements...
Feedlot placements have been astounding this year, reaching record levels in five of the past eight months.
Because placements and feedlot inventories grew to record levels in late summer, the number of “market ready” cattle will expand sharply into fall. Although marketings were up six percent in August, they need to exceed last year by at least ten percent this fall to avoid burdensome supplies. Assuming September, October, and November marketings exceed last year by ten percent, the number of cattle on feed for 120 days or more projects as follows...
Cattle on feed for 120 days or more normally reach market weight in the next 30 days. If feedlots market ten percent more cattle each month from September through November, the inventory of heavy weight cattle will still be the largest since 1992 on December 1. (Comparative statistics are not available prior to 1992 due to a change in USDA reporting methods.)
Although cow slaughter is expected to decline from last year as cattlemen begin to rebuild herds, beef production will approach burdensome levels throughout the fall. We expect December futures to trade in the $63 to $65 area before expiration.
September 20, 1997 Bill Gary
Commodity Information Systems, Inc.
1601 N.W. Express Way, Suite 1450, Oklahoma City, Oklahoma
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