This is a sample entry from Kirk Donsbach’s newsletter, The Cattleman’s Advisory, published on December 12, 2016.
Weekly Cattle Commentary 12/09/2016
Cash sales ended the week at 110$ in Wyoming, Colorado, and Nebraska. Dressed prices at 170$. Basis appears to be 1$ over December futures. With the winter weather holding over cattle feeding country, weather may become a market driver.
The week ending Nov 26th showed steer carcass weights 2# lower at 916#, 6# below last year’s weights.
Seasonals turned mildly bearish the end of November. The rising dollar and interest rates are concerning. December also brings year end book squaring.
Right now, it appears both retailers and processors are maintaining good margins, even with the high slaughter rates. That is bullish over the long term, but we may have come a little too far too fast.
February Live consolidated and marked time this week. Following the big sell signals the week before, that is somewhat encouraging. I don’t have a good read on the market right here. One more valiant try higher is possible, especially given last week’s resiliency. A trade below 108 would suggest a run down to the up trend line around 106.
Feeder Cattle will likely follow Live’s lead. Local cash sales have been surprisingly optimistic.
January Feeders consolidated this week, trading in a 3$ range. As with live cattle, I don’t have a good feel for this market right here. One more serious try at the 200 day Moving average and Down trend line would not surprise, but neither would selling pressure. A trade below 122.92 would suggest the later.
Short term trend bullish, but conflicting with the nearly 10 month old major down trend.
Moving averages are bullish, but the 10 day is threatening to roll back over.
Stochastics are still giving a fresh sell signal.
Down Side Targets (January)
First support at 122.92
Up trend line around 122
Major resistance at 129.6
Major Down trend line at 131
200 day Moving average also at 131
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. We are working orders to roll them higher, but they have not been filled.
For those selling next spring or later, we got a major reversal Thursday (12/1) and confirming extension lower the next day. We initiated hedges when the market filled the bottom of the gap at 125.12 and extended below 124.50 (12/2). I would love to see the market give it one more go at higher, to roll up into. However, the technical damage Friday cannot be ignored. We will be rolling positions up depending on the clients level of aggressiveness and time until cash sales. I personally have until June/July and working a 1:5 ratio higher.
It may be of interest that the aggressive hedgers appear to have gotten more favorable positions. For those keeping track, that often seems to be the case.
Spring sales of Live cattle are 100% hedged with about 40% of total cash sales at Feb 106 puts, and the rest with Feb 110 puts. We are working orders roll the 106 puts up, but as of this moment, our 1:4 orders did not get filled. Remember when rolling up, a 1:2 ratio means ½ of the increase in strike price is your money. Bragging rights at the coffee shop is about all that gets you.
Contact one of the Daniels Trading brokers below for more trading ideas.
January Feeder chart sourced from RJO Vantage 12/9/2016
March 2016 Corn chart sourced from RJO Vantage 12/9/2016
February Live chart sourced from RJO Vantage 12/9/2016
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