This is a sample entry from Kirk Donsbach’s newsletter, The Cattleman’s Advisory, published on November 15, 2016.
Weekly Cattle Commentary 11/11/2016
Cash sales occurred Late Friday at 105$. Dressed prices looked to be 161-163$. Basis appears to be even with December futures. Fridays Box prices averaged 184.62 for choice cuts, down 2.2% compared to last week.
The week ending Oct 29th showed steer carcass weights 2# higher at 917#, 2# below last year’s weights.
Seasonally turn mildly bearish the end of November.
December Live spent most of the week regaining losses from the previous week, closing near the high for this move. I still favor the odds of the market reaching first resistance at 108, and then maybe, the top of the channel at 112. We need to extend above 106 this week to maintain momentum.
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 November. Feeders do not have a chance until Live finds a bottom.
January Feeder’s completed a minor correction Monday and then spent the week regaining price momentum. Friday saw a weekly close equal to the high of the move. As in Live, we probably need to push through nearest resistance at 121 relatively soon to maintain bullish momentum. Several technical points converge around the 128 area.
Short term trend is bullish.
Moving averages are neutral.
Stochastics gave a buy signal.
Several other indicators are showing divergence over the past several months. An indication of a bottom approaching.
Downside Targets (November)
Yearly low of 110.65
First support at 114
Major resistance at 127.5
Top of the channel at 132
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. Tuesday (10/4) we rolled the 132 Oct puts out to 121 – 122 Nov puts, with 2$s of hedge profits left over. IF the market tracks higher, we will be looking to roll out to January at a higher price. (for those that need January)
For long hedge’s, we recommended placing orders above Mondays high (8/29 – 133.1 Nov) to buy Nov out of the money calls. Tuesday (8/30) our trigger was hit and I hedged a future bred heifer purchase with 138 Nov calls for 2.7$. With hindsight as our guide, that was obviously a little early. Late last week we rolled them down a third time, utilizing a ratio of nearly 1:8. We now have 5$ into 124 Nov calls and will wait for the market to work lower or the calls to start making money. Relative to my overall position, we have a 5$ hedge cost with the future cash purchase price locked in 14$ cheaper than when we initially thought we had a buying opportunity.
January Feeder chart sourced from RJO Vantage 11/11/2016
December 2016 Corn chart sourced from RJO Vantage 11/14/2016
December Live chart sourced from RJO Vantage 11/11/2016
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