We have compared live cattle prices with the stock market, inflation, unemployment figures, and many other factors. The main financial indicator, which seems to hold a better relationship than others are the monthly employment numbers (non-farm payrolls). In modern financial times we had job loss periods in 1970, 1974-1975, 1980, 1981-1983, 1990-1991, and 2001 to 2003. In the current downturn net job losses have been seen in every month of this year, which puts this year, and potentially 2009, into this elite group. In each of those previous downturns, live cattle prices fell a minimum of 10% and up to 25% year over year. We could project a $90 to $85 minimum downside objective using those parameters easily, if not more. While this news is not heartening we have to note we did not do any comparison work of years that had shrinking cattle supplies, which is what is going on now. That could negate some of this effect. Additionally we have to clarify the job gains/losses did not match up reliably to the timing of the cattle market decline.
Overall, this Live Cattle market is being rocketed by general commodity market liquidation as Wall Street continues to liquidate all holdings, including commodities, in a scramble for cash. We can note with surprise that Monday's wholesale beef closed up $3.74 for choice and 46 cents for select. We have to say that is an anomaly for now. For now there is no reason to stand in front of this market with long futures. Also, in the next few weeks and months we will begin pointing out how inflation could be a big bullish factor in 2009 pricing. While the general economic news of job losses is bearish for beef and cattle, but if we get inflation in here the mid 2009 period could turn out to be good. At this time of year cow/calf producers are wondering if they should sell their freshly weaned spring born calf crop or attempt to over-winter them. We would encourage active cash market sales right now and turn around and buy a March feeder cattle call for limited risk ownership. Technically the trend in Live Cattle is down. New contract lows were made in most contracts on Monday.
Next projected major turn day for Live Cattle is scheduled for October 17th. At this time Allendale recommends to stand aside the Live Cattle in both the futures and options.
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