Interdum stultus opportuna loquitur...

Wednesday, October 20, 2004

Live Cattle Should Tank...

Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.

Live Cattle have been all over the map in the last 12-18 months. After going berserk - following an embargo imposed on Canadian cattle imports, and buoyed by the Atkins diet craze - and reaching almost $100 (the high was 99.35), the BSE (Bovine Spongiform Encephalopathy) scare in the US herd saw prices tank to under $75.
The market then bounced, and bounced hard - getting back into the 90's. the USDA went into hyperdrive, spinning the story that the "downer cow" (of course, there was only one) was actually a Canadian import.... yeah, right.
Fact is, the US slaughters tens of thousands of downer cattle (defined as cattle that can't stand on their own at the time of slaugher) and it is only a matter of time before the few vCJD (variant Creutzfeld-Jakob Disease) clusters that have appeared in the US are linked categorically to beef consumption.

Frankly I am not a believer that vCJD in humans is linked to BSE in cattle; I think that evrybody gets a little bit hysterical when a disease usually afflictling the elderly, crops up in a few relatively young people (the number of very young people who have contracted vCJD: less than 100 - although there have been less than a dozen young victims of "ordinary" CJD recorded.)

While very sad for the families, and with vCJD being pathologically different from general sporadic CJD, it's still not clear that the prions that cause BSE and CJD are related,

Anyway - I'm not making light of the victims, and it's clear that if the UK research on CJD clusters (and their possible link to beef consumption) is to be seen as authoritative then similar work on US CJD clusters will devastate the Live Cattle market.

Add to this, the recent spate of negative publicity about the Atkins diet - particularly the long-term ramifications of long periods of deep ketosis - and you have a recipe for Cattle having made a long term top. Live Cattle (December 04) daily: overbought, ROC divergence

Live Cattle (December 04) 60 minute: overbought, ROC divergence

All things considered, it looks like Cattle is at or near a top. the best-fit options for my trading style, are the $89 December04 Puts. I would bid under $2 for them - $1.90 or thereabouts ought to secure them, and if they open down so much the better.