Cattle Market: What Goes Up Comes Down

April 8, 2010 07:00 PM
Linda H. Smith, AgWeb Business and Marketing Editor
The most exciting market right now is the red-hot cattle market, with feeders making it to the first line of overhead resistance at $117, says Jim Bower of Bower trading. "It has made quite a move in a short time. I generally don't favor put options, but the one place I would consider them is in a vertical move like this one. There is the potential for cattle to continue higher, but what goes up vertically often comes down the same way. A put option would allow you put a floor in place in case the market turns.”
One thing that could turn it around is a serious drought in the U.S. or China, says Bower. "Not only is China consuming tremendous amounts of soybeans, but they announced release of 1.5 million metric tons of their corn reserves. Basis in China has been very strong so supplies are either out of position or usage of corn as well as DDGs is exceptional.”
Bower also believes we may have heard the last of the negative wheat reports. Listen to his commentary for details.

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