This is a sample entry from Kirk Donsbach’s newsletter, The Cattleman’s Advisory, published on April 24, 2017.
Weekly Cattle Commentary 04/21/2017
|Month||Actual||Average of Estimates||Range of Estimates|
|Cattle on Feed||April||100||99.7||98.7-100.6|
Cash sales for this last week were mostly 130 to 133$. Reported dressed sales occurred at 210 -212$. Basis is about even with April futures, depending on the area. Estimated weekly slaughter was 595K head. Box prices have regained more of their losses, with choice down about 5$ from the March high and now back above the 5 year average.
The week ending Apr 8th showed steer carcass weights falling 10# versus the prior week to 852#. 28 pounds under last year. Marginally below the 5 year average.
June Live closed Friday with a new yearly high trade and weakly high close, with all technical indications pointing higher. Funds continue to add contracts. The market will react violently IF something spooks the longs. Until then managed money and trend will be supportive. Seasonals are now also adding support. As of Monday morning, the COF surprise has June posting a solid trend line break and confirming Fridays reversal. Keep in mind the market also posted a reversal Tuesday, that was canceled by Thursday. I don’t know if this is the top, but this is what a top will look like when it comes.
Feeder Cattle Green grass and positive feeder margins are supportive to the feeder market, especially light cattle. The CME feeder cattle index is at 138.05. The index is now about 1$ under April Feeders. Break evens are getting tough to work if the market strength doesn’t continue.
May Feeders reached 143 on Thursday before closing lower with a solid looking reversal. The surprise in the COF has the market confirming Thursdays reversal and breaking the short term up trend line Monday mornig. You can be fairly confident that this minor “wave” or move higher is complete. We do not know if this is a correction, looking for a lower price to initiate the next wave to new highs, or a major top. I would not want to see weakness extend below 134 to 136$.
Seasonals have turned higher. May feeder futures topped in March or April five of the last 7 years. 2014 May feeders rallied through expiration. 2013 May feeders posted a high in January.
Short term trend for May feeders is neutral with the minor trend line break lower.
Moving averages are bullish.
Stochastics gave a fresh sell last week.
Down Side Targets (May feeders)
Support at 129
Major trend line at 124
Major support around 121
Gap on the continuation chart around 143 (satisfied Thursday)
Bull flag projections to 146.
Major resistance at 150
Most clients moved to May puts on 3/23 or 3/24. With May futures above 135, I personally spent 3$ on 132 May puts. Some clients chose to be less aggressive and went with the less expensive 130 puts. We rolled to 138 may puts one way or the other on Thursday (4/20). I spent 1.25$ and increased my protection level 6$ for a ratio of 1:4.8.
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$ 2 weeks ago, and the 110 to 114s were filled at a 1$ cost late last week. All clients sit with 112 or 114 June Live puts.
May Feeder chart sourced from RJO Vantage 4/24/2017
July Corn chart sourced from RJO Vantage 4/24/2017
June Live chart sourced from RJO Vantage 4/24/2017
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