COMMODITY RESOURCE CORPORATION

WHEAT: OUTLOOK--Since our last update, the wheat market has rallied about 20 cents/bushel, and is probably due for a bit of a rest. Don`t get me wrong, the longer-term outlook for wheat is decidedly bullish. However, at this point in time wheat is definitely the follower at the Board of Trade [corn being the leader]. The funds seem to like selling wheat every time it pops it`s head up, and with export demand more neutral than bullish, support is only evident on price declines. Yet, it is hard for me to envision the market breaking very much. Subsoil moisture reserves are well below year-ago levels in 4 major producing states, and many areas will need late autumn rains to replenish soil moisture for the new winter wheat crop. There are bound to be weather scares affecting this market in the coming months.

STRATEGY--HEDGERS: If you have been following our recommendations you should not own any cash wheat at this time. Rather you should have maintained ownership of wheat on paper with call options. Remember, with options, your risk is limited at most to the cost of the options plus fees. You can trade in and out of these positions much easier. Selective hedgers [those who will assume the risk of the marketplace at times] may want to consider taking profits on lower strike calls now, looking to repurchase on 15-20 cents corrections from the top.

TRADERS: Hold Minneapolis December futures bought in the 352 to 356 range. Raise the stop to 389 to lock in a bit more profit. OUTLOOK<197>I have the sense that the USDA will again lower their crop estimate for corn on the next report, and this would be quite bullish to the market should it occur. This forecast is based on reports of ear drop which appear more widespread than I can remember. Meanwhile, despite a crop which still will be large on a historical basis, many farmers are storing rather than selling. They see higher prices down the road, and I have to agree. Demand from all sources, particularly livestock feeding, looks as if it will continue to grow into the next year. A market acting this strong in the thick of harvest is a market which is telling us it wants to head north!

STRATEGY--HEDGERS: Since our outlook is bullish, you should consider maintaining ownership by selling your cash corn at harvest [to raise cash to use now], and the simultaneous purchase of March at the money calls to maintain ownership. The calls will limit your downside risk, while maintaining your upside potential.

TRADERS: You should have easily been able to buy March below 295 [our recommended level] last week as it traded as low as 290 on the open Monday. Our stop is 280. Our profit objective on this move is 320.

SOYBEANS: OUTLOOK<197>The bull remains in the soybean box again this week, and it not due to supply. My sense is the USDA could come out with a bearish number on the upcoming crop report based on good yields. However, should the market break on a bearish number, it would be a buying opportunity, my opinion. The reason is demand which is record large now, 50% above a year ago, and does not look like it will slow down. Recall, the South Americans are sold out and the world must come to the U.S. for their soybean needs over the coming months. This will be a volatile market, beans almost always are, but when this market falls, step up to the plate!

STRATEGY--HEDGERS: We are out of all hedges at profits. We continue to suggest maintaining ownership after your sell your cash crop with the purchase of March call options.

TRADERS: We remain long November futures from below $6.26, and this continues to look like the low. Raise your risk point to $6.64. Leave the upside profit objective open at this time.

CATTLE: OUTLOOK--The latest Cattle on Feed data was construed as bearish. After all, the placements into feedlots registered in at a new record high for September. The major 7 state supply of cattle tallied in at 8.56 million head, up over one million from last year. However, if one takes a closer look at the data, a different picture develops; at least for the longer pull. It seems the sharp increase in on-feed numbers is primarily due to a dramatic increase in heifers. Heifer and heifer calves on feed are up a whopping 21%. This indicates adequate supplies for the winter, but this is herd reduction and is very bullish for next year`s outlook.

STRATEGY<197>FEEDERS: No future price protection is suggested at current prices at this time.

COW/CALF OPERATORS: We are short November feeder futures. Cover these hedges under 74, or as you market your cattle.

TRADERS: We continue to suggest a sidelines approach at present however are searching for a longer-term buying opportunity.

George Kleinman
Commodity Resource Corporation
P.O. Box 8700, Incline Village, Nevada

Addex 10-28-97
Last updated on 10-28-97

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