Shootin' the Bull about a transfer of risk

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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3/12/2024

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Live Cattle:

A spurt of activity pushed futures higher, but fizzled out by the close. The range bound trade of futures, and to some extent the slow crawl higher in cash is believed that along with the higher box price, is opening margin to the packer.  The cattle feeder continues to teeter with profits if within a formula or vertical integration, while still $200.00 plus loser in just plain old feeding cattle. Today's CPI report continues to show inflation pesky to the consumer.  Shoving box prices higher will only add to the reasons for another shift in consumer discretionary spending. At back over $308.00, that is a near $16.00 rally in box price from the winter low. As summer grilling and activities have yet to even begin in earnest, the consumer is expected to see some of the highest retail prices ever.   

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Feeder Cattle:

Record numbers of calves and stocker cattle continue to be marketed.  It's a seller's market.  For those buying, at not only record high prices, but at the volume being moved, a great deal of risk transfer is taking place to you.  Let that sink in for just a minute. It's a sellers market with record prices, and record volume for some brick and mortar establishments.  This could be the, or second largest transfer of risk since September of last year.  Now, let's take this the next step forward.  Those who bought are now at risk, at a historical price.  A huge transfer of risk. 

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Hogs:

Hogs were higher.  The lean hog index was down $.07 at $81.41.  I remain wrong on hogs and still don't understand the higher trading, and believe the volatility created by the computers to be less than attractive to trade in.

Corn:

A mixed bag all the way around.  Beans were the strongest.  November beans are nearing a level in which some marketing will be recommended.  I expect more sideways to higher trading as the wave 4 continues to unfold with key report due out at the end of the month.  Were beans to be the benefactor of more acres over corn, I would anticipate the wave count to change to a more bearish wave count.  I have already changed it to reflect the decline as a wave 1 and current correction a wave 2.  In the old crop, this probably remains as a wave 4 correction with a wave 5 to a new contract low. 

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Energy:

Energy trading remains uneven with crude oil and gasoline stronger than diesel fuel. Trading continues to be highly volatile with the price range expanded a couple of times through the day.  My expectation is for energy prices to decline.  With a great deal of the middle-east news fading from the news casts, and the US production near record, it leads me to anticipate a move lower in energy.  With diesel fuel the weakest, a trade of May under $2.54 will be anticipated to set the stage for further declines and a possible test of contract low.  

Bonds:

On the mid day cattle comment, I recommended buying June bonds today with a sell stop to exit only at $118'27.  This is a sales solicitation.  I anticipate bonds to move higher in anticipation of Fed action through the year.  At present, it is Hawkish, with today's CPI number helping to keep it Hawkish.  Thursday's PPI number may do the same.  Going forward, when or if the bout of inflation does its job, then the next most probable move will be deflation and bond prices would move higher on such. 

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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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