“Shootin’ The Bull”
End of Day Market Recap
by Christopher Swift
3/7/2024
Live Cattle:
It was a buying spree today in just about everything. Cattle were not going to be left out with all contract months attempting to push higher. With the advent of the new highs in the back month contracts, I'll give it a couple of days to see how high traders may push futures. The consumer was handed another bout of inflation today with literally everything higher. With seemingly still plenty of money to spend, it would lead me to anticipate further heavy handed tactics to break the stagflation.
Feeder Cattle:
Futures traders appear to be going to ride the basis out to as close to expiration as possible. I know there is great expectation for the cattle feeder to increase the bids for inventory. Convergence of basis will take place, therefore by holding on to hedged positions, the index will either rise to the levels of futures, or futures will decline to the levels of the index. Of those few things we know. I am not as perplexed on the market moving higher or lower. I think it could do either one. The concern is the industry as a whole. The extent of capital is enormous to produce a pound of beef. Margins are thin when available with most cattle feeders buying inventory with a negative margin, suggesting the price of fats has to go up, or the price of feed down sharply. Neither appear prone to do such. A comment from a reader today provided good insight into the dairy/beef cross. While the discussion didn't produce much in the way of determining the next most probable move, the end result of the conversation was; I don't disagree that this won't be the saving grace of the beef industry, but it is what we have to work with and since I would never bet against the tenacity of the American producer to produce, I lean more towards the dairy/beef cross mitigating short beef cattle supplies until further production can be realized, or worse, a shift in consumer demand that lowers beef demand. It was noted that Australian exports are 24% month over month with Japan, China, Korea, and the US receiving the lions share of their exports.
Hogs:
Hogs were higher except April today. Note I moved the stop down. Intra day action suggests I don't want to see June trade back above $102.00. That was the intraday high of Tuesday, the outside reversal day.
I recommend selling June hogs with a buy stop to exit only at $102.20. This is a sales solicitation.
Corn:
Grains and oilseeds were higher today. I expect the wave 4 is now in progress. How much time and price is traversed may not be known for a couple of weeks. Friday's WASDE report will most likely produce some fireworks, but the most interesting aspect won't come until the planted acres report on the 28th. I continue to anticipate further downside price movement, but a short covering rally is expected before moving lower.
Energy:
Energy continues its volatile rein. Higher for most of the session, crude oil closed lower on the day. Even gasoline at the close was lower on the day. Diesel fuel was higher, but not by much. I am going to stick my neck out again on energy in a belief that energy prices will follow suit to the seemingly stronger fundamentals of increased US oil production and move more in line with what analyst's were anticipating in January. A trade of May crude under $77.00 is anticipated to set the stage for a major C wave decline. If so, this would be a signal of recession.
Bonds:
Bonds were firm today. Were the oil to move in the anticipated direction, I will expect the bonds to move higher.
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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