Shootin' the Bull about mounting evidence of the agenda

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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7/3/2024

Live Cattle:

In my opinion, a portion of the agenda is hitting a milestone this week with a story of a fully enclosed loop of beef/dairy cross cattle production.  This article from the Dairy Herd Management website, explains it much better than I can. From my perspective, it is further proof of the agenda at play.  While still in its infancy, the article, along with multiple others read, suggests it is here to stay.  Note that there will be some unintended consequences to this as the dairy industry may find itself a little short on heifers and milking cows as this progresses.  Some in the dairy industry have voiced this may be what helps prop up milk prices.  Nonetheless, the doldrums of summer are here for beef eating and fed steer slaughter.  Both will be expected to taper off in the coming weeks.  Another part of the agenda was recognized with box beef topping mid-day at $330.86.  Higher prices limit the number of buyers. Rationing continues. Cattle feeders remain in a bind as profit margins are expected to start to decline, back to a significant negative margin.  Without a higher cash trade in the fats, the higher price of feeders through the spring, and up to now, will begin to turn profits into losses.  The near $10.00 positive basis doesn't help them either.  They are currently loaded down with the most expensive inventory in history, literally no decline in beef production year over year, and a consumer that continues to deal with inflation, to a point in which further shifting in discretionary spending is expected.  There are few ways to avoid the $10.00 positive basis spread in fats. Buying the at the money put is believed a way of minimizing the loss, with potential expectations of ability to adjust were a large price move to occur.  This is a sales solicitation.  Selling futures or selling calls to reduce the put premium caps the upside potential and upside potential is needed greatly.  So, worry about the downside and pray for the upside.  

Backgrounders are at the cusp of unloading the highest priced inventory in their lives.  For some, it will be paying.  It is believed that more cattle will be available on the video sales than first thought late this spring. Potentially, this may cause cattle feeders to step back just a little and maybe scratch their head as to what to pay.  The index has softened slightly from the high and futures traders took all but a few dollars of the basis spreads away through the past couple of months.  The triangle continues and prices are currently at the top side of the triangle, leading me to make recommendations to get your inventory marketed as soon as possible and if that is not available to you, get a floor under them as quickly as possible.  If you hedge or forward market, and prices remain stout, all the better for you to be assured of the highest price possible.  If prices do not remain stout, all the better for you to be assured of the highest price possible. Get it?  These are the highest prices and you are in the midst of marketing nearly half of this year's inventory on those video sales.  Either you, your lender, and/or your business assume the risk, or you allow someone else to, there is no in-between that I know of.  At this point, I recommend you allow someone else to assume your risk. This is a sales solicitation. If you haven't seen the latest webinar "Nearing a turning point of the triangle", I recommend you take a listen, and it may help you to make a more informed decision.  

Feed costs are not much different.  I don't expect them to be much more than a drag on cattle as the old adage of "cheap corn makes cheap cattle" has yet to be dispelled.  Corn remains in a bear market and all of the rain causing ponding and drowned corn in some areas makes everything else in the best shape it could be in.  The carryout in corn is huge and this year's crop is big and most likely to get bigger.  Beans are in a bear market and may have a little more trouble than corn, but I think this little rally will fade pretty quickly.  

Energy has been my Achillies heel recently as I have been expecting energy prices to move lower and they have done little more than go up every day.  Today has made the high so far from the June 4 low in crude and the products.   While none were able to set a new contract high, they made a valiant attempt at it. Bonds have been stupendously volatile.  However, I expect bonds to move higher and made recommendations this week to own bonds.  This is a sales solicitation. When one considers the rate of return on fixed instruments and the risk assumed at the tip top of equities, it appears the environment ripe to swap some assets around.  The glitch to this is how Americans continue to view the current administration and whether anyone is at the helm. My view has consistently been that the king has no clothes on.  However, after last week's debate, even the most ardent supporter could see there was nothing there.  So, we will have to muddle through 4 more months of this leaderless administration and hope for the best in November.  

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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