This is a sample entry from Kirk Donsbach’s newsletter, The Cattleman’s Advisory, published on October 03, 2016.
Weekly Cattle Commentary 9/30/2016
Cash sales this week ranged from 104$ early to 100$ Friday. Dressed prices Friday look to be 160$. Basis appears to be 1$ over October futures.
Seasonally the cash market generally starts to work higher through the cooler months.
Commentary contributed by John Payne.
October Live set new yearly lows below the psychological 100$ level and supporting trend line. The charts all point lower. I fundamentally don’t understand this market being this weak, with the profit margin for the packer and retailer being what it is. Clearly this is an issue of leverage, and the feeder has none.
Feeder Cattle have a minor seasonal bottom the first part of October. All indicators point to a slug of calves yet to be sold in October and November. On a positive note, futures will build this into the market before the calves start to show up. Feeders do not have a chance until Live finds a bottom.
October feeders never penetrated the down trend line and failed the bottom side of the channel I mentioned last week. In the process, they canceled the key reversal from early September and closed at new yearly lows on Friday. The charts all point towards another significant leg lower.
With the losses in Feeder Country over the past year or two, one should not be surprised to see the feeder/live spread narrowing.
Short term trend is negative.
Moving averages are negative.
Stochastics gave a new sell signal.
Downside Targets (October)
2011 low of 121.375
Top of the channel at 134.20
The nearest top side resistance sits at 140.32
We aggressively rolled down Oct puts to 132 some time ago, most of them close to a 1:2 ratio. In doing so, we gave up a little protection but financed, or came close to financing the October hedge. We will be working orders to take profit on the 132 Oct puts and buy November puts. That recommendation is based on rolling down at a 1:4 ratio.
For long hedges we recommended placing orders above Mondays high (8/29 – 133.1 Nov) to buy Nov out of the money calls. Tuesday (8/30) our trigger was hit and I hedged a future bred heifer purchase with 138 Nov calls for 2.7$. With hindsight as our guide, that was obviously a little early. On 9/6 we added 1$ of hedge expense and rolled the 138 calls down to 134 calls. I am willing to roll them down again, but I am going to be more passive, looking for 1:6 at a minimum.
Contact one of the Daniels Trading brokers below for ideas on where to initiate hedges if your 2016 production is not already covered, or to transfer risk out of the cash and into calls.
October Feeder chart sourced from RJO Vantage 9/30/2016
December 2016 Corn chart sourced from RJO Vantage 10/3/2016
October Live chart sourced from RJO Vantage 9/30/2016
For more information or to sign up for current updates contact:
- Donna Hughes (email@example.com)
- Kirk Donsbach (firstname.lastname@example.org)
- John Payne (email@example.com)
Try The Cattleman’s Advisory for 60 Days
The Cattleman’s Advisory Trial - The Cattleman’s Advisory is a newsletter designed for producers of cattle by a producer of cattle. All subscribers can expect a weekly update of the Fundamental and Technical conditions of the cattle markets, setting the table for the week ahead.
The Cattleman’s Advisory includes an email newsletter subscription.
The Cattleman’s Advisory trial lasts 60 days.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.