This is a sample entry from Kirk Donsbach’s newsletter, The Cattleman’s Advisory, published on November 21, 2016.
Weekly Cattle Commentary 11/18/2016
Cash sales topped last week at 110$. Dressed prices looked to be 168-170$. Basis appears to be 2$ over December futures. Box prices held steady compared to last week, but on very good volume.
The week ending Nov 5th showed steer carcass weights 4# lower at 913#, 6# below last year’s weights.
Seasonals turn mildly bearish the end of November, and the rising dollar is concerning.
December Live had a very nice week, taking out the 61.8% retracement level and the 108.90 resistance. Thursday did show a minor reversal, but I am not too concerned about that just yet. I think the market wants to make a run at the down trend line, and probably the 200 day moving average at 112.
Feeder Cattle. The Cattle on Feed placement number did not show the slug of calves I was concerned about. Most are calling the COF “as expected” to slightly bullish. Most analysts also feel that there is still a large available supply of calves in the country. Some price higher probably brings them to town. This is not the time to become complacent.
January Feeder’s did not take out the 61.8% retracement level or nearest resistance, but they look strong for the moment. The 132 level does not seem to be as unreasonable as it was a week ago. I like the action in feeders, but as with live, now is not the time for complacency.
Short term trend is bullish.
Moving averages are bullish.
Stochastics are in a buy signal.
Several other indicators are showing divergence over the past several months. An indication of a bottom approaching.
Down Side Targets (November)
First support at 114
Yearly low of 110.65
Major resistance at 127.5
Top of the channel at 132
At 126 January feeder’s we initiated January puts for individuals that will be selling cattle the first of the year. At this level, we had increased the equity position in the cattle enough to pay for the January hedge. Given the limited amount of time before a cash sale has to be made, we wanted to stay pretty aggressive.
For those selling next spring or later, we have enough time to take a slightly more passive approach. I am looking for a major reversal, or the 132 level.
The Nov long hedges expired. I did get 2$ of the 5$ we spent back, losing 3$ in the hedge. Most of our clients, including myself, have made the necessary fall purchases. When we initiated the hedge, bred heifers were selling for around 1500$. Today in Montana, I would call them 1300. Depending on the exact timing, the calf purchases followed a similar pattern.
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January Feeder chart sourced from RJO Vantage 11/18/201
December 2016 Corn chart sourced from RJO Vantage 11/21/2016
December Live chart sourced from RJO Vantage 11/18/2016
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