Shootin' the Bull about boxes dropping

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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7/9/2024

Live Cattle:

Today it is believed recognized that the consumer is pulling back.  The 4th of July holiday is believed the last spending spree until Christmas for consumers.  Boxes fell off sharply at mid day and energy prices lower as well.  The Fed continues with policy to curb inflation and there are few markets any more inflated than the cattle market. Cattle feeders are going backwards again.  With no significant drop in fats, the margins should go back to negative around the end of August.  Were fat cattle prices to soften, that will be closer to the end of July.  The agenda continues and I now believe that by years end, beef production in 2025 could be equal to 2024.  The futures markets are $10.00 discount to last weeks cash trade and cattle feeders continue to bid top price for a great deal of incoming inventory.    

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Feeder Cattle:

Congratulations to those selling, and condolences for those having to buy, at these prices. Once the drop in box price was revealed, it seemingly sent the signal that wholesale beef demand reached a top.  It also suggests grocers are not in a hurry to restock shelves.  Other signals of decline are coming from the restaurant industry.  Darden restaurants is on track for lowest close since October of '23.  The restaurant index has remained under 100 for sometime now with few expectations for growth anytime soon.  Futures traders have been waiting for this, as for months they have meticulously narrowed basis to even, and today, positive. Buyers have nowhere to turn to achieve a higher price in the future for anything.  You are paying it today.  I am almost out of things to say as most of what was expected is now coming to fruition.  My analysis suggests the next most probable move to be a decline to the up trend line of the triangle.  Recall that if the triangle is broken to the downside, it will increase the probability of the second wave count I showed on the last video. That wave count suggested the top of futures made in September of '23 to the December low as a major wave A decline.  A large triangular formation then ensued to mark time until either beef production increased or decreased.  I believe we are on the cusp of increasing beef production to a point in which the elasticity of the market will begin to snap back.  If so, then the most recent high of last week would be the termination of the major wave B with a major wave C decline anticipated.  Major wave C is expected to be equal to or greater than the A wave decline. There will be some discrepancies due to the short period of life of contract per respective contract month, as well as the weekly continuation charts not having similar price action.  If I take the August though, as it has all of the trading from the September of '23 high today, and subtract the length of wave A $53.42, from the top of wave B $263.90, it suggests a downside target to $210.48 August.  Since there is limited time, and I don't expect that dramatic of a drop in the next 7 weeks, but going into the fall, I would look for contract months to trade down to this level.  All things considered, this target would be a near double bottom to the December '23 low on the weekly continuation chart. Long way around the barn, but what has been anticipated has come to fruition.  I think it is time to start thinking about prices outside of the triangle and what fundamentals there are to push them outside of, higher or lower.   

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Hogs:

​Hogs are lower.  Basis has converged.  The last hogs & pigs report was not bullish, or is seemingly much else.  Consumers did not flock to pork as was expected with beef as high as it is.  Chicken took the lead and is expected to continue as the variations in cooking are greatly different to the busy family. ​

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Corn:  

Although repeating myself, but if you want to make money while grain prices are low, and you are willing to sell your grain if a specific price is met, then I recommend selling call options on the number of bushels you wish or need to sell, at a strike price you are willing to sell grain.  This is a sales solicitation.  If that price is not achieved, you will then collect the premium.  If that price is achieved, you will be selling grain at that level.  If you do not understand, and would like to, call me and I will be glad to explain the risks and rewards of such.  ​

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Energy:

​Energy has seen both sides of unchanged today, but ended lower.  The three week rally was tough to trade through being negative.  While nothing has reversed yet, I am not bullish energy.  ​

Bonds:

Bonds continue to trade in a wide range.  I expect bonds to move higher.  I expect the Fed to continue attempting to quell inflation.  I expect the government to continue to spend at this alarming rate, if not increase as it appears this administration may not last much longer. Both create a disturbing environment for consumers who are not privy to government spending on them.  There remains a few markets still at the tip top of the inflationary scale, Cocoa, Cattle, Equity Indices and Homes.  Along with gold still higher, and seemingly wanting to trade higher, these markets appear to have the most to lose.  

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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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