Shootin' the Bull about light and heavy placements

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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2/21/2024

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Live Cattle:

Traders did not disappoint today when once again, they produced enormous amounts of volatility in price discovery.  Friday's on feed report is anticipated to be skewed to the point in which it will be the March on feed report to decipher both January's low placement and February's high placement.  Nonetheless, the number on feed is believed not only sufficient, but potentially, a little burdensome. With packers searching for margin, the most likely scenario will be to slow the slaughter pace and allow time for additional pounds to be put on the carcass, and lowering the amount of available beef to help prop up box prices.  Regardless of price direction, the amount of money it takes to produce a pound of beef continues to increase.  While some point to lower corn, others point to higher wages for labor and energy costs.  Futures traders are not offering the same premiums as feeder cattle futures are.  For those with cattle on feed, the premium is minimum, but a premium nonetheless. Today, futures traders pushed February and April to the second highest price in history, with February only $1.80 from the all time high set on the weekly continuation charts.  Options will be of very little help, if not a big move to the downside.  I would prefer futures in order to capture the entire basis available at the time, and not give away dollars in option premium.  Again, you have to be prepared to allow for full convergence of basis as that is all there is to capture.   

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Feeder Cattle:

The March contract made new highs today and diverged over $10.00 at one point today and closed just under $9.00.  That will be at zero on the last trading day of March, regardless of whether cattle feeders push physical inventory higher, or futures traders the futures lower.  I do not envy the marketing decisions that must be made. However, I do find it easier to make those decisions with ample premium to work with.  The index reading's don't seem to be reflecting the same hype as the futures markets are.  Recall the function of the futures market, it is to allow the purchase or sale of a commodity in the future, at a price that may or may not be higher, lower, or have ever traded in the cash markets. If you need help, or just want a question answered, contact us and we will be glad to help. 

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Hogs:

Hogs were mixed with the index up $1.05 to $76.80.  Meats have been uncanny in ability to stay elevated.  Low volume and high volatility is believed keeping some from participating, creating more volatility.  

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Corn:

Grain traders continue to sell grain as there is a lot of it to sell.  A new low in all old crop corn contracts, with a new low close in the new crop December.  Beans continued lower as well.  All but the November contract made new lows in this decline.  Soybean meal was able to sustain its position without trading to new lows.  I think soymeal is bottoming, while beans may trade another dollar lower. 

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Energy:

Energy was mixed today.  Volatility was immense in energy trading with multiple up and down moves within a very sloppy up move in general.  Diesel was lower, but gasoline and crude oil higher.  

Bonds:

Bonds continued lower, but so far have not elected the stops from yesterday's recommendation to own June bonds.  I continue to recommend owning June bonds with a sell stop to exit only at $117'20.  The bonds sold off when the FOMC minutes were released today, but have since bounced off of the lows posted.  There is no seemingly way out of this situation at the moment as the current administration is fueling the flames of inflation with the forgiveness of debt they did not allocate, with increased spending on all fronts of illegal immigration.  The Fed simply doesn't have much of a chance to make headway without stomping out government spending. Hence, the more likely the US moves towards recession once again.  

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This is intended to be or is in the nature of a solicitation. An investment in futures contracts is speculative, involves a high degree of risk and is suitable only for persons who can assume the risk of loss in excess of the margin deposits.  You should carefully consider whether futures trading is appropriate for you in light of your investment experience, trading objectives, financial resources and other relevant circumstances. PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. 

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