12/05/05 Too much optimism in cattle futures?

American Rancher December 5, 2005 Cattle futures at the Chicago Mercantile Exchange have enjoyed tremendous strength as of late and it is not just because of winter weather. DTN Chief Livestock Analyst John Harrington, says fundamentally, there just aren't enough cattle to meet packer demand given packer capacity in the U.S. Then there are some non-traditional players in the futures market. Harrington: "Hedge fund managers, new speculators whoever they are, they are really addicted to the long side of the market and have pushed this market far beyond what I think fundamentals justify." As Harrington sees it, cattle futures don't reflect decidedly bearish supply fundamentals looming in the first quarter of 2006. Harrington: "My fundamentals tell me that we are set to produce about 400-million more pounds of beef in the first quarter of 2006 than we did last year. Guess what we averaged last year? About $87. The market is incredibly predicting that we are going to sell cattle $8-$10 dollars higher even though we'll produce 400-million more pounds of beef. Now, that is optimism with a capital "O" no doubt about it." I'm Bob Hoff.