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Cattle-on-Feed report meets expectations

Soybeans: Another strong day today in the bean market is turning many bullish. We are in no place to argue, especially with China buying US beans aggressively again.

Beans have traded between 1030 and 1050 through most of the week which is comparable to what we saw in early August. At that time, we traded up to or slightly above 1050 four times before the overnight ran it up and the day session took it all way and then ran it down for three days. After that three day sell off, beans had lost nearly a dollar of value. What this shows us for upcoming prices is that we have struggled here before. A move and a settle above 1050 will look strong but a move above 1060 would be much more significant. A close above 1060 will open the door to even higher trade. That trade will need to be backed up by continued strong China demand as that is the last fundamental factor strong enough to allow for trade this high. While we can not argue China offers good support, it is yet another factor that can end at any time, without warning, and while being bullish may be warranted it must be done with caution. Those bullish in August were quickly shown the door so let's make sure we do not repeat that this time without fore warning. Today, saw another strong close but yet again did not manage to close above 1050. As mentioned, that will be the level we need to close above to continue a bullish mentality. Bulls are relying on fund spec buying and China. Let's go ahead and look for higher prices but have our stops close.

Direction: Next resistance is 1068. Key support is now 990. Buy against support but fundamentally we will want to be short if support fails to hold. Farmers should be using 3-way option plans to lock in revenue…Ryan Ettner

Trade Idea(s):

(11/20) Buy Jan 1054 stop, risk 17 from entry, objective 1070. (This will change again Monday afternoon.)
Option Strategy(s):
(10/08) Bought Mar 920 put, sold 1020 call, sold 800 put for 10…producer idea. There is margin required with this, but you are in a position to make 120/bu if the market breaks while leaving a 100/bu upside open before you are locked into a short.
(11/16) Sold March 1140 call 26 1/2, risk to 42, objective 0. Closed 38 1/4.

Allendale's Rich Nelson will utilize fundamental and technical indicators to provide a full 2010 outlook for the soybean market at Allendale's annual conference.

***Disclaimer*** The commentary and trades below are derived from technical indicators provided in our Allendale Advanced Charts pages and may not correspond with the fundamental commentary above.

Soybean Technical Commentary: Beans have bumped up against the key psychological level of 1050 the past 3 sessions now. Today's close was near it though, so it may only be a temporary hurdle. We will stand aside for Monday.

Vital Technical Indicator: the next projected major turn day for soybeans is November 25, soybean meal is November 24, and soybean oil is November 27.

Closing Cattle Commentary

Live Cattle: This afternoon's Cattle on Feed report was pretty close to expectations. Placements during October came in a little lower than expectations which will help April and June futures. Calves and feeders placed during October finish out between March and early August. The actual number released by USDA was a 1.5% increase. We now have four months in a row of higher than last year placements. This means slaughter cattle out of feedlots will be higher the 2009 levels in the first quarter and maybe the early second quarter.

Marketings: Fat cattle leaving feedlots in October (Marketings) were seen a little smaller than expected. The trade was looking for 2.9% smaller Marketings but they came out 3.3% smaller. You may have some arguing that Marketings were low because feedlots were holding onto cattle. That would be wrong. In recent week's steer carcass weights fell 23 lbs while heifer carcass weights fell 20 lbs. Falling weights means we are doing just fine in Marketing cattle. The Marketing number is a little bullish.

Cattle on Feed: Last month cattle in feedlots were .6% higher. With bigger placements and smaller marketings the November 1 COF number increased to 1.5% larger. That was expected and should have no market impact.

Direction: Between now and most of December we look for a sideways market. We all now slaughter numbers will start to pick up. Helping to offset some of that increase is the drop in weights seen in the past five weeks. Right now we are simply waiting for unemployment to stop increasing. The next price mover will be demand. When unemployment stops increasing we can get back to getting bullish…Rich Nelson

Trade Ideas(s):

(11/20) Buy Apr 87.35, risk 86.00, objective 89.25.
Option Strategy(s):

· (11/19) Sell Feb 82 Put/sell Feb 88 call 2.00, risk to 3.00, objective 0.

How closely related are cattle and beef prices to the jobless rate and what does it mean to your operation? Find out from Rich Nelson at the 2010 Allendale Outlook Conference.

***Disclaimer*** The commentary and trades below are derived from technical indicators provided in our Allendale Advanced Charts pages and may not correspond with the fundamental commentary above.

Cattle Technical Commentary: Cattle settled above the 10 day MA for the week today. They held above the DB low at 82.80 all week as well, so this might be a sign of a bottom. We will leave a buy stop order in at 84.25 above this week's highs.

Vital Technical Indicator: Next projected major turn day for live cattle is December 2 and for feeders is November 24.

Rich Nelson
Director of Research
Allendale, Inc
4506 Prime Parkway
McHenry, IL 60050
800-262-7538

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will achieve profits or losses similar to those shown. In fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. For example, the ability to withstand losses or adhere to a particular trading program in spite of trading losses are material points which can adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.

Soybeans: Another strong day today in the bean market is turning many bullish. We are in no place to argue, especially with China buying US beans aggressively again.

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