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Mid
Day Cattle Comment
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Live Cattle:
The new contract highs today in the December, February, and April
contracts have set the stage for a wave 5 of 5 rally. Upside
target for December measures to $103.40. Regardless of whether
it makes that target or not, there are 5 waves up on the minor and
intermediate wave count. With this new high, some parameters
can be drawn up which may or may not help. A trade up to
$103.40 December is anticipated. If it does not make that
target, then a trade under $99.67 December will begin to suggest a
top is in. So, if your looking for a point in which to say the
up move is complete before it moves close to or gets to the upside
target, I would draw the line in the sand at $99.67 December.
I recommend initiating a put option or an option strategy in
the October and December contracts.
I have no quarrel with wanting to do something in the February
and April contracts. If these months are desired, then contact
me and I'll help work out some strategies. I continue to view
the cattle market as firm and when this rally terminates, I do not
anticipate the beginning of a bear market, only a correction of the
bull market.
Feeder Cattle:
The recovery came today. I remain bullish feeders, but I am
not sure whether the current economic situation warrants feed lots
to want to bid up product. It is possible that the market could get
into a similar situation as it did this spring. Feed lots may
have already contracted a great deal of this falls production.
Therefore, this could lead to a bidding war between those without
contracted product. The cattle industry continues to look more
and more integrated. While it will never look like a farrow to
finish hog operation or broiler house, due to sheer land mass
needed, the contracts being made between producers keeps product off
the open market and consolidates the number of times a steer or
heifer might be sold. At some point in time, I could see XYZ
feed lot assume total risk of animal from birth to packer.
They contract x number of head from the cow/calf operation, then
send them to somewhere else to grow them and then move them to the
feed lot. Ownership never changes hands and therefore price
fluctuation would be minimized to the feed lot. It could look
similar to the dairy industry where heifers are grown on the gain.
As it stands, the average steer changes ownership 5 times before it
hits the meat counter. The cow/calf operation owns it first.
Then he sells to a stocker. The stocker sells to the feed lot, the
feed lot sells to the packer and the packer to the retailer. Long
story short, there's a lot of hands in the cookie jar. Markets
these days demand efficiency. The consolidation and
streamlining of the industry appears to be on the move.
Corn:
At today's close, December corn has a new high close and a new
high in the oscillator. This doesn't mean there will be an
explosive rally, but it does tend to have me shy away from a top
having been formed yet.
Heating Oil (Diesel):
October heating oil is nearing the 34 day moving average. A
couple of days held above the average will lead me to step up
recommendations on buying calls.
For a copy of the "Security
Agreement And Assignment Of Hedging Account" just let me know and I
will email you the PDF file for you to view.
New Account Forms
Live account forms on line. They are very simple to use
and can be filled out in a matter of minutes. I look forward to
earning your business. If
you have any questions or would like further information, please
feel free to contact me at anytime.
