From the April 01, 2011 issue of Futures Magazine • Subscribe!

Live cattle running wild

Live cattle have enjoyed a bull market since October and only recently begun breaking to the down-side. “The live cattle market is a bull market that a lot of people missed,” says Mike Zarembski, senior commodity analyst at optionsXpress.com. The market gained nearly 25% from the October low of .94500 to the recent record high of 1.1800.

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Zarembski says this is a market that has been building for some time. “The many years of unprofitable trade finally has come home to roost. We are seeing tight supplies in the feed lots as packers are forced to get supplies,” he says. Much of the recent break to lower prices he attributes to falling grain prices and the disaster in Japan because it is a big importer of U.S. beef. Going forward, he says to watch grain prices and how events in Japan unfold. He sees support for the June contract at 1.124 and 1.10, and resistance at 1.18 to 1.20.

Kyle Schrad, risk management consultant at FC Stone, agrees with Zarembski. “We have very short supply in comparison to where we have been historically. It’s a market that has been following the general outside markets and that’s true of the long-term trend as it has moved higher with corn and grains,” he says. In addition to grain prices, Schrad says to watch cattle supplies as we enter the grilling season. He sees support at 1.08 and resistance at the record-high of 1.18.

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