Shootin' the Bull about being spooked

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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7/11/2024

Live Cattle:

Today's price action in equities and interest rate instruments, when combined with the current political turmoil, leaves me not knowing what to expect from cattle. What I believe is that were equities were to turn south and bonds north, it would send a signal to the consumer to contract in spending.  There is a huge housing bubble with the perception that a great deal of is speculatively being built, or corporately for rental.  Gasoline prices have yet to subside, or beef at the retail counter.  Only Tuesday have we seen the first crack in the wholesale markets.  Futures traders made things worse again today for cattle feeders.  While a boost to the backgrounder, it only went to spread the starting feeder to finished fat wider.  There had been some gains made in this spread the past couple of days, but today's significantly higher feeder cattle prices pushed it the other way.  Nonetheless, cattle feeders have their plate full of high priced feeder cattle to work through over the next 5 to 8 months.  There is little to suggest the consumer will increase spending or willingness to pay for anything, and today's price action in the financial markets spooked me. 

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Feeder Cattle:

Futures traders helped  a little today, but have a long way to go to even come close to producing previous benefits. Price action today appears to be consolidation, leading me to expect a resumption of the recent down movement.  All reliance is on the cattle feeder with a positive basis.  If you want the highest price available, you have to sell them today.  Every price in the future is discount to today. While some will dismiss dated information, but I recall very well the banking crisis of '08 and watched fat cattle lose $26.00 in 3 months on zero cattle issues.  It actually stopped a roaring rally from earlier that year, cold in its tracks.  While there is no financial issue known at the moment, many feel there are several issues brewing in the background.  As well, the political turmoil and the potential to unseat a sitting President without having followed by death or illegal actions, (Nixon), has me spooked. 

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Hogs:

​Hogs are higher.  The width of basis spread is most likely what pushed hogs higher. 

Corn:  

Grains are in a bear market.   They may have some form of sideways to higher correction due to the heat wave next week.  After such, or upon assessment of no damage done, would lead me to expect new lows in both corn and beans. With the wheat harvest wrapping up, and a significant double bottom in price, I would be hesitant selling wheat at this level.  While I don't expect it to move sharply higher, it could trade off the lows by quite a bit and still only be viewed as a correction. 

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Energy:

​Energy remains stout.  I am not bullish and may turn starkly bearish were the economic turmoil to worsen.  I am unsure how it can get much worse, but I am sure they will find a way.  Nonetheless, gasoline was higher today, keeping retail pump prices elevated.  Of the markets that have not been impacted by the Fed's movements are equities, housing, energy and beef.  As the Fed continues to suggest they will curb inflation, I have to pay close attention to the markets that remain at historically elevated levels. Energies, while not at historical levels, are nearer contract highs than lows.   

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Bonds:

Bonds soared today with inflation running at one tenth of one percent less than what they thought, although, still running at 3%.  I expect bonds to continue higher.  The issue I have is whether there is a flight to quality with the building political turmoil. Other than that, the Fed is believed going to continue to combat inflation and with the help of high fuel and food prices, is expected to succeed. 

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