Friday, July 17, 2015

Mid Day Cattle Comment

Mid Day Cattle Comment July 17, 2015 Live Cattle: August gold set a new contract low today and spot gold came to within $3.00 of the weekly low from the August of '11 high. Crude oil is $1.54 from its contract low and all but one or two commodities are down this morning. Deflation is upon us. Consumers are not increasing discretionary spending. The consumer price index was up two tenths of a percent excluding food and energy. It was up 3 tenths total. Therefore one tenth of one percent was the change for food and energy. Beef, as the commodity closest to its historical high than any other commodity out there, sure looks vulnerable in comparison to all other commodities and competing proteins especially. The loss of massive open interest is perceived a demonstrative statement that participants feel price fluctuation for beef will be limited in respects to the amount of capital that may need to be invested and the return potential. Downside objective remains the April low per respective contract month. What the chart formation looks like if this materializes will help to calculate the next most probable move. Feeder Cattle: Feeder cattle are the only other commodity at such a close proximity to their historical high. Not only that, as a raw product, the cost to manufacture to a finished product is calculated to reflect a negative profit margin for the processor. This suggests that feeder cattle prices could be subject to a lack of demand due to such extreme calculated losses. I anticipate feeder cattle to move lower going into late summer. My guess is that on July 24th, the USDA will increase the herd expansion to a level greater than what most in the industry will anticipate. The price structure of feeder cattle remains positive at the front and negative in the back. The faster you move inventory now, the higher price you will secure. At present the futures market suggests you will receive less for your product the longer you hold on to it. I recommend reviewing this and make applicable decisions based upon your risk assumed. Corn: Corn is moving lower. What is perceived as a wave 4 correction continues to play out. I anticipate upon completion of the wave 4 that December corn will move to $4.80&1/4 to complete a 5 wave sequence.

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