Wayne Purcell Cattle Outlook 26 Apr 2005
Cash cattle were as high as $94 late last week and may go higher this week with help from stronger boxed beef and generally positive numbers in the April 22 Cattle on Feed report. . The expiring April futures are around $92 and the next actively traded contract is June and it closed the week at $85.72. To date, cattle slaughter is running over 4.0% below last year, so reduced supplies are helping keep prices up. The USDA in April 8 reports was predicting second quarter beef production at 6.525 billion lbs, up 4.3% from the 2004 6.253 billion but that increase is not happening. The question is whether any increase will just get delayed to the end of this quarter and into the third quarter.
The continued price strength is also countering the naysayers who keep finding something wrong with the indicators that demand is in good shape. Still, the early 2005 cattle placements were big cattle and they will start to come to market in the June to August period and that keeps me alert. June has an early March high of $87.70 and I suspect that June futures will increase across the next few weeks and that cash prices will start to moderate and move lower. Sell rallies toward that $87.70 level and be prepared, if need be, to answer a margin call or two or use the trend line across the late February and mid-April levels and wait for a close below that line to sell.
Remember, two consecutive closes above the $87.70 high means the market is going higher and selective hedgers will buy back short hedges if new highs are made.
August feeder cattle make a new high at $108.80 by a few cents last week and moved up again on Monday. . I have been suggesting that short hedges around the old highs near $108.50 will be okay and I still think so. If you want to let this market run to the upside, use a trend line hooking the $105.05 low on April 8 and the $107.60 low on April 22.
posted by Dr. Harlan Hughes 9:00 AM