This is a sample entry from Kirk Donsbach’s newsletter, The Cattleman’s Advisory, published on January 23, 2017.
Weekly Cattle Commentary 01/20/2017
Cash sales closed the week mostly 122$ with 123$ in Texas, and 195$ dressed. Basis appears to be 3 over February futures. Lower cutout and higher cash has squeezed packer margins into the red.
The week ending January 7th showed steer carcass weights another 5# higher than the prior week at 905#, moving well above last year’s weights.
The rising dollar and interest rates are concerning, although the dollar seems to be correcting at the moment. January usually shifts beef demand away from ribs and loins, with chucks and grounds gaining. Often supplied by the heavy run of fall cows.
Amazingly, Hogs still holding steady since the bearish pig report.
Right now, it appears retailers are maintaining good margins, with processing margins slipping. For the first time in a while, many Fed cattle are also showing good margins.
February Live had a very positive week, setting new highs for the move at 121.44. There are several indicators, both fundamental and technical, that are warning of a nearing top, but for now the chart is pointed higher. It is a little concerning that futures didn’t seem very impressed with the jump in cash prices on Friday. We will need to see Monday’s action to evaluate whether that was pre-weekend profit taking, or something more.
Feeder Cattle will likely follow Live’s lead, but I am concerned that they are lagging February Live Cattle’s very impressive rally.
March Feeders also had a positive week, with most of the work coming pre-close on Friday. The caution signs increase almost daily, but for now we appear on track for 137. If we get there, I cannot come up with one good reason not to hedge that level, and hope we see 150 or higher. The million dollar question is, do you wait for 137?
Short term trend for March feeders is bullish.
Moving averages are bullish.
Stochastics gave a buy signal 1/9.
Down Side Targets (March)
Minor up trend line around 128
First support at 128.65
Up trend line around 125.50
Major resistance at 137
At 126 January feeder’s we initiated January puts for individuals that will be selling cattle the first of the year. These clients should be making cash sales and exiting the hedge shortly, at pretty good cash prices.
For those selling this spring or later, our January puts have pretty much run their course. As long as March is rallying we can let it run. If March turns lower, I am very concerned that our January puts will not perform like we need them to. IF March drops below major support at 125.50 we need to move to March. I recommend being more aggressive and using the nearest support at 128.65. We have sent out recommendations on where it makes business sense to roll to march if we continue higher. At 136 March I recommend everyone being hedged up.
Spring sales of Live cattle were 100% hedged with about 40% of total cash sales at Feb 106 puts, and the rest with Feb 110 puts or higher. We rolled the 106 to 110 and then all of them twice more, with the last cumulating on 1/11. The net result is we added 3$ of expense to the 106 puts, and 2$ to the 110 puts, but now sit with 118 February puts. Our next move will be out to June, either at higher money or when the 118 Feb puts can cash flow the move.
Contact one of the Daniels Trading brokers below for more trading ideas.
March Feeder chart sourced from RJO Vantage 1/20/2017
March Corn chart sourced from RJO Vantage 1/22/2017
February Live chart sourced from RJO Vantage 1/20/2017
For more information or to sign up for current updates contact:
- Donna Hughes (firstname.lastname@example.org)
- Kirk Donsbach (email@example.com)
- John Payne (firstname.lastname@example.org)
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.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
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 third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.