This is a sample entry from Kirk Donsbach’s newsletter, The Cattleman’s Advisory, published on February 06, 2017.
Weekly Cattle Commentary 02/03/2017
Cash sales closed the week mostly 119 to 119.50 and 190$ dressed. Basis appears to be 2$ over February futures.
The week ending January 21st showed steer carcass weights declining 9# versus the prior week to 889#.
So far Managed Money is fighting the correction lower and Fund long positions have only declined marginally. If we take out Wednesdays low I expect that to change. Some analysts are calling the correction over.
Right now, it appears retailers are maintaining good margins, with processing margins working back to even. Fed cattle are showing profit margins over 100$ a head.
February Live found the lows for the week on Wednesday at 114.65, after leaving a big gap on Monday. Futures probably got a little too far below the 119 cash on Wednesday, and closed the week narrowing the basis back to a more acceptable 2$. Technically Wednesday traced out a reversal higher, indicating at least one or two days of higher trading. Friday nudged into the overhead gap left Monday, but then reversed back lower. This week it will be critical for the market to fill Mondays gap and stay supported above Wednesday’s low. A move below Wednesdays low probably confirms 121.02 as the spring high.
Feeder Cattle will likely follow Live’s lead, only at an accelerated pace.
March Feeders mirrored Live cattle’s pattern this week, but unlike February live, took out trend line and Moving Average support with Mondays gap. Feeders were not able to seriously threaten filling their gap as of Friday, and then closed lower forming a reversal lower. That reversal could very well signal the end of feeders attempts at correcting higher for now. Some analysts are calling the downward movement in feeders over, I tend to disagree. The chart read for feeders looks toppy. Seasonally, weakness through March is expected. A trade below Wednesdays 121.075 low helps confirm.
Short term trend for March feeders is bearish.
Moving averages are neutral.
Stochastics gave a sell signal 1/24.
Down Side Targets (March feeders)
Support at 121.075
Overhead gap between 127.575 and 125.20
Most of our clientele left Jan puts expiring worthless and moved to March 127 puts. We also rolled some 120 and 122 March puts up at 1:5 or 1:6 ratios. The last of them was done 1/25 as feeder futures slipped in the face of a 124 Fed Exchange cash highs. The January holdouts rolled to March 125 puts as the 128.65 level was penetrated. On average, we have a concerning 6 or 7$ into 125 – 127 March puts, but after the COF and gap lower, that doesn’t seem to be near as concerning as it was.
We salvaged a little over a dollar of value out of the Feb Live puts and moved the rest of our clientele to June 104 puts. This contract should get our clients out to their kill dates, with no more need to buy additional time. From this point on we will be working the ratios to either retrieve some of the expended cash, or lock in higher cash prices.
Contact one of the Daniels Trading brokers below for more trading ideas.
March Feeder chart sourced from RJO Vantage 2/3/2017
March Corn chart sourced from RJO Vantage 2/6/2017
February Live chart sourced from RJO Vantage 2/3/2017
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