The cattle trade appears ready to wait until today's 2pm monthly Cattle on Feed report before starting cash cattle trading this week. Thursday the live based areas saw bids of $89 and asking prices of $93. The Nebraska dressed trade saw bids of $143 to $144 versus asking prices of $148 to $150. The current average guesses would suggest bull spreading (buying the April based on big Marketings/selling the August based on big Placements). In other news Indonesia has ended its three-year ban on US beef. They have issued a permit to a local firm for importation of 4,200 tonnes of beef. Any imports will only be allowed from four specific packing plants. As Indonesia is such a small player in historical imports of US beef, we do not look for any market movement on this news. We are bearish on the June and August as that is when the brunt of these extra placements will be hitting. The April/June live cattle spread is back to a slight discount. Keep in mind our limited risk is only $1.50 from entry, which would be a 50-cent discount. Another speculative idea is to sell $92 April puts.
Cattle placements have now been up in four of the last five months. Cattle placed in January will be marketed from June through September 2008. The placement number itself is the second lowest in ten years however. Lower Marketing's in January was due to reduced packer kill levels. With the inflow of placements recently, Cattle on Feed is growing. The current February 1 estimate is the second largest number since the current data series began in 95/96. These extra supplies are expected to be marketed from mid-March into July.
For Allendale's specific numbers relating to this month's COF, you can find them on the Livestock Fundamental page of the Allendale Advisory Report.
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