First I use a Daily Chart to determine "Trend" and I have the continuous contract (FC #F) with over 11 years worth of price data that shows, without a shadow of a doubt (at least how I determine the Trend and with 11 years of verified oscillations that builds a huge amount of confidence), that this Market is in a Bull Trend. That gives me a foundation of strength in a single direction to determine my trades of "Least Risk". This chart that I am posting only goes back to Feb. 1997 but you will get the picture.
I stand corrected . . . I got long on May 6th, as the Market created the mid-bottom at 102.550. That was my confirmation that the bottom not only had set in but was confirmed and verified. Now I stay in until an extreme oscillation (117.925 currently) is challenged and subsequently fails. I have a Stop in place @ 114.000.
and the top is in place. really: costs 57,525 to buy 65 head of cattle 13,562 to feed them and sell them for 72,050. thin
A couple technical questions: What can we infer as to market structure/pricing by looking at the Choice/Select spread? Can any directional bias be inferred from this? Pasture condition looked to be pretty bad in last USDA report. How will this affect the July 21st report? Feedlots "rush" to sell their animals? A duh question: Why is there a seasonal bias in summer for weaker beef? "Heard" commercials scaling up selling today, and heard of live cattle trading circa 84 which was "disappointing".
Any trade today was probably second cut cattle and likely does not represent the average. Summer is when supplies are large and ready for slaughter and demand drops off as humans, just like other animals, consume less protein in hot weather. Pasture conditions have been bad but have improved over a large area. This affects ranchers and stocker operators directly, feedlots indirectly. For instance we just brought in 4 loads of cattle off pasture due to dry conditions on a large portion of our ranch-they are coming into our feedlot for the time being. Choice-select spread should narrow as supplies are large and demand is seasonally low during the heart of summer and picks up again into the fall. Beef prices should weaken and this is not supportive to cattle prices.
07-06-06 12:59 PM and the top is in place. really: costs 57,525 to buy 65 head of cattle 13,562 to feed them and sell them for 72,050. thin 65 Hd won't eat 5000 bu of corn. More like 3500 bu. Although other costs do make it about $19,000 at the moment.
Right, my $19,000 number was based upon a $.55 cost of gain and taking them from 750# to 1300#. $19000 is certainly in the ballpark. I think this is turning into the smartest thread on elitetrader even though there are only a few of us.
thanks for the clarification traderaaa, in my view today's technical rejection of new highs and closing at the lows is bearish. in october feeders i'm looking for a break of 113 to set the ball going. my view is that live prices should wane as well and i purchased a 88 dec put today at the close for 2.60. initially i was going to buy a put spread, buy 90, sell 88 but the bid offer was horrible on the spread and even with a midmarket bid the pit didn't hit me. what i need to focus on is how the trade will look when and if its wrong and where i should stop out. on one side i have time to wait for the move into a summer decline with dec premium, on the other, technical discipline i guess, should have me stopping out on a daily close above the high. the sell setup is still intact , though, in my view. thanks for demark- it is a very nice tool, and using it on 5 min intraday setups works well too. traderaaa, why did you mention that weekly dressed steer weights where much higher this year than previous years with weights clocking in the 800's ? i wonder too if hog dynamics will influence cattle px's. with the steep backwardation in hogs i would feel there is a negative pull in prices as time goes by.
oh and my favorite: which i never understand. i would love to know the different grades/ regional discounts-premiums to interpret all this cash "buzz" into something i can compare equitably to futures: AM_LS830 Amarillo, TX Thu Jul 06, 2006 USDA Market News Daily Livestock Summary CATTLE In the direct slaughter cattle trade in the Five Major Marketing Areas, Texas/Oklahoma; Kansas; Nebraska; Colorado; Iowa/Minnesota: Compared to Wednesday, Limited early sales and not enough volume for an accurate trend analysis. Steers: Live basis; (all Grades: 1,163 head) 84.00, weighted average 84.00. Dressed basis; (all Grades: 1,461 head) 132.00, weighted average 132.00. Heifers: live basis; (all Grades: 233 head) 84.00, weighted average 84.00. Dressed Basis; (all Grades: 564 head) 129.50-132.00, weighted average 130.61. Auction markets: So St Paul Slaughter steers and heifers steady. Steers: Choice 2-4 1220-1334 lbs 80.00-82.50. Select and Choice 2-3 few 1200-1350 lbs 75.00-78.00. Heifers: Choice 2-4: few 1160 lbs 81.00. Sioux Falls Wed auction slaughter steers 2.00-2.50 lower, heifers not well tested. Steers: Choice 2-3 1350-1425 lbs 81.00-82.10. Choice end Prime 3-4 couple pkgs 1575-1775 lbs 75.00-81.25. High Select and Choice 2-3 1325-1375 lbs 79.25-81.00. Heifers: Choice 2-4 pkg 1240 lbs 82.90. High Select and Choice 2-3 1250-1275 lbs 80.75-81.00. Tama, IA Slaughter cattle auction Wed auction. No test due to holiday.