This is a sample entry from Kirk Donsbach’s newsletter, The Cattleman’s Advisory, published on April 17, 2017.
Weekly Cattle Commentary 04/14/2017
Cash sales for Thursday where mostly 128 in the south and 128 – 131 in the North. Reported dressed sales occurred at 206 -208$. Basis is 6$ over April futures. Estimated weekly slaughter was 590K head. Box prices have regained some of their losses, with choice down 10$ from the March high and about even with the 5 year average.
The week ending Apr 1st showed steer carcass weights falling 6# versus the prior week to 862#. 22 pounds under last year. Still marginally above the 5 year average.
June Live Excluding a minor pause Thursday for the Easter weekend, all indications point higher. Funds added 2300 contracts, bringing their net long to 123,300. That is nearly an all time record high. The market will react violently IF something spooks the longs. Until then managed money and trend will be supportive. The seasonals are decisively lower Monday through the 22nd. Boxes are showing some support.
Feeder Cattle Green grass and positive feeder margins are supportive to the feeder market, especially light cattle. The CME feeder cattle index is at 134.21. The index is now about 4$ under April Feeders. Break evens are getting tough to work if the market rally doesn’t continue.
May Feeders posted a key reversal on 3/23 and also formed a descending channel. Friday saw a breakout of the channel higher. The Bull Flag in orange was confirmed with projections up to 146. The continuation chart has a gap and a down trend line around 143. Major resistance sits at 150.
Seasonal weakness persists through the 22nd. May feeder futures topped in March or April five of the last 7 years. 2014 May feeders rallied through expiration. 2013 May feeders posted a high in January.
Short term trend for May feeders is bullish, but not defined.
Moving averages are bullish.
Stochastics maintain a buy signal.
Down Side Targets (May feeders)
Support at 129
Major trend line at 124
Major support around 121
Gap on the continuation chart around 143
Bull flag projections to 146.
Major resistance at 150
Most clients moved to May puts on 3/23 or 3/24. With May futures above 135, I personally spent 3$ on 132 May puts. Some clients chose to be less aggressive and went with the less expensive 130 puts. The additional cost of the May put is more than covered by the increase in protected cash value. The basis offered on fall delivery cattle is not yet what I am looking for. I placed an order to roll the 132 May put up at 1:5. That should get filled around 142.
We salvaged a little over a dollar of value out of the Feb Live puts and moved to June 104 puts a while back. On 3/23 we rolled June 104s up to June 108s, and June 106s up to June 110s. We added 1$ of hedge expense in both instances. The 108s were rolled to 112 for 1$ last week, and we are working orders to roll the 110s at 1:5.
May Feeder chart sourced from RJO Vantage 4/13/2017
July Corn chart sourced from RJO Vantage 4/18/2017
June Live chart sourced from RJO Vantage 4/13/2017
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