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THE HIGHTOWER REPORT
141 W. Jackson Blvd., Ste. 1520A, Chicago, Illinois
(March 26, 1997)
CATTLE:
The cattle market is nearing a major low. From a supply perspective, this may not occur until the summer as placements of cattle onto feedlots has swelled on-feed supplies to 8% over last year by March 1st. Beef supplies should peak and will gradually decline for at least 6-12 months following the peak. As the market adjusts to the lower supplies, prices will gradually increase and should reach the upper 70's by the spring of 1998. This forecast for summer lows near $60.00-$62.00 and spring of 1998 highs near $76.00-$78.00 is based on supply while leaving the demand factors stagnant. If demand is better than expected, he numbers are too low. Exports of beef may also improve from the low levels of the past 6 months as Japanese food scare demand and European mad cow demand may recover from last year's extremely low levels. World demand for high quality restaurant beef demand continues to improve with the growing middle and upper class population in the Far East and the Southern hemisphere. The huge supply of cattle on feed is not necessarily a bearish situation as long as non-fed slaughter is on the decline. If the deferred cattle futures and calf prices stay firm, non-fed cattle and cow slaughter should trend lower for the remainder of the year. Cheap grain would also be a concern due to the potential for higher weights, however, $3.00 corn and the discount of summer futures to the cash market should keep weights down. The surge in placements, high calf slaughter last year and the higher cattle prices for December cattle are all factors which may support August feeder cattle. The available supplies are growing tight due to the high placements and demand for this time frame should be good as long as feedgrain prices are reasonable as December live cattle are trading just under $70.00.
SUGGESTED TRADING STRATEGIES
1) Buy August feeder cattle at 70.80 with an objective of 74.95 and potentially 76.95. Risk to 69.77. 2) Buy December cattle at 68.80 with an objective of 71.90. Risk to 68.05.
For dailiy market updates of the Hightower Report of Comprehensive Commodity
Research, call 900-225-2200, extension 4 for Livestock Market Forecast.
The cost per minute is $1.33.
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