Shootin' the Bull about no lower beef production

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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3/4/2024

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Live Cattle:

I think it will take weeks before the death loss can be calculated to any great extent from the Texas wildfire.  Excluding this factor for a moment, the agenda continues to put more beef on to the market than was anticipated.  I think this is due to several reasons working in unison to achieve profit margin, and keep beef prices from deterring consumer demand. Consumer demand is worrisome as there has been little to no relief from on the retail side, and most recently gasoline prices have risen as well.  Production numbers to date show less than 2% year over year decline in beef production, with carcass weights now improving.  As well, the slow process of stopping liquidation and reverting to expansion is believed to have allowed the beef/dairy cross to actually be increasing meat production, instead of countering a percentage of lost beef due to expansion.  With expansion still not having begun yet, the other alternatives are believed creating a toe hold on increasing beef production.  

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Feeder Cattle:

An article in Drovers stated that cattle feeders were finally starting to come out of the red.  This may be so for those within a vertically integrated supply chain, or based on formula's.  However, for the raw cattle feeder that still buys feeders on the open market and feeds them, shows significant losses projected.  The squeeze on margins continues to be in the cattle feeding sector.  While backgrounders and cow/calf operations are still showing some profits, if supplies are going to be as tight as many expect, then there remains too much feeding capacity.  Feeder cattle were softer today.  The index continues to be stout, but not to the same extent of the futures.  This has kept basis negative and allowed for anyone needing or wanting to manage risk, the ability to do so with premium.  I continue to anticipate a contraction in price action that will mimic a triangular formation.  This is believed needed as there are multiple fundamentals at play that greatly impact price fluctuation. Some more bullish or bearish than others, but neither believed strong enough to produce a new contract high or low.  Hence the triangle formation.    

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Hogs:

April hogs were sharply lower with the other months higher.  The index was up $.11 at $80.26.  I remain completely wrong on my analysis.  

Corn:

Grains were a tad firmer today, but seemingly, the market just ran out of sellers.  Basis collapsed last week and with the insurance rates set, there isn't a great deal to look forward to.  I anticipate grains to trade higher to sideways with not much enthusiasm. 

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Energy:

Energy couldn't hold on to Friday's gains.  By mid morning, traders had pushed May back to within $.63 of Friday's low.  For the time being, I am going to continue to believe the breakout is to the upside.  By far, diesel fuel is the weakest, with gasoline and crude oil firmer. There is a big disconnect between what supplies in the US are versus why the price of oil remains elevated. With oil believed having broken out to the upside, with gold and bitcoin moving in inflationary manners, the current bout of inflation may remain for a little while.  

Bonds:

Bonds were soft, but did little today.  This week will have bond moving news as Federal Reserve Powell will present a 2 day Humphrey-Hawkins report to congress, along with the monthly unemployment report.  

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