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COMMODITY INSIGHT
152 Ennis Lake Road, Ennis, Montana
(October 12, 1997) CATTLE: While hog prices ended the week at their lowest levels in almost a year, cattle prices actually rallied from Tuesday through and including Friday. The cattle market has assumed a leadership role in the livestock complex. Hog prices continue to be pressured by very poor domestic and foreign demand. As long as that continues, hog prices will struggle to mount and sustain any sort of rally. The 38 cents a bushel rise in the price of corn over the past seven days has not helped prices either. Lately, the fundamentals impacting pork prices have been out and out bearish. The market is now reflecting that fact.
Cattle prices on the other hand, are starting to show signs of life. From Tuesday's low to Friday's high, for instance, December cattle futures have rallied almost $2.00. And feeder cattle have been holding up well at the very same levels they bottomed at in mid-April when prices eventually rallied $7.00 into mid-summer.
From a fundamental standpoint, further gains in cattle futures can be justified. Beef demand is on the rise and prices are depressed. That alone is reason enough for the board to rally. But add to that scenario the prospects for a “harsh winter” as forecast by the National Weather Service, and this week's low for cattle prices may indeed be long lasting and significant.
Also, one of my sources argues that the Cattle on Feed report due to be released on October 17, will be bullish. They go on to claim that the next 5 to 6 reports will also be bullish as well. My bias is to buy cattle on any hard break. The Commodity Insight website went long February cattle this week at 67.82 and January feeders at 78.60.
Jerry F. Welch
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