COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6, Orleans, Massachusetts
(October 29, 1997) CATTLE: SHORT TERM–Depending on who you talk to, the winter storm was very serious indeed, with heavy death loss and prices should move higher, or conversely, supplies further down the road will be ample, and pork and poultry will offer serious retail competition, leading to lower prices. While I believe that the numbers may be higher than hoped for, the storm may change the cattle numbers, and while other kinds of meat offer competition, they aren't substitutes. Current supplies are tight, and many producers are busy with dealing with the results of the storm. The prospect of increased weather problems may encourage the market to begin to price in some sort of winter-weather premium in the near future. Cold and ice make it difficult for cattle to maintain weight and for producers to bring them to market. Seasonals suggest higher prices.
RESISTANCE–Resistance basis December lies near 6780, 6825, 6850-6875, 6890, 6930 or so.
SUPPORT–Support basis December lies near 6700, 6600, 6550-6525.
RECOMMENDATION–The December chart suggests a bottom may be in place. The fact that October went off the board well is also constructive, with strong buyers and low deliveries when much of the trade was looking for heavy deliveries and weak buyers. Traders might continue to buy December cattle in the low 6700's, with stops of 100 points or under 6660. Look for a test of at least the mid 6800's, but there is the potential for a move to near 7000. Option traders might buy December calls for a move to near 7000. Long-term players could consider buying the April cattle at current levels with stops of 100-150 points. Objective is open.
M. Steven Morgan
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