Shootin' the Bull about changing factors.

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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7/29/2024

Live Cattle:

A couple of factors stick out to me.  One is the higher cash trade last week, and quick convergence of basis.  This week already starts out with a lower futures trade, leading me to believe futures traders are bearish, and only when the basis spread gets too wide, do they react.  Second is that even with the higher cash trade, profit margins shrank for the cattle feeder.  How? They paid an even higher price for the incoming feeder steer when purchased.  Today, as we can see the highest price paid was in July, pushing a need for fat cattle to be higher, all the way beyond December.  Lastly was the announcement from McDonalds that they had seen a 1% decline in volume, due to a rise in menu prices.  While the rise in price helped to offset the volume decline, it suggests to me that even 1% fewer McDonalds eaters can afford to eat there.  Consumer contraction is being seen in multiple sectors with today's sharply lower energy prices leading me to believe the inflation is having an impact on consumers, more so than the government spending can supersede.  

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The significant overlapping of waves from the April low, to present, per respective contract month, leads me to believe it is part of this triangular correction, even though it has lost a great deal of its formation.  Were we to see the anticipated decline materialize, then new lines could be drawn with just a different angle of the triangle.  Long way around the barn, but do whatever it takes to get a minimum sale floor underneath your production. This is a sales solicitation.  

​Feeder Cattle:

Cattle coming off the Osage and Flint Hills is expected to see placements grow in late July, early August.  I think with the price, there is going to be a steady supply of inventory to come to the market.  Especially if the price begins to trade lower. Those who own them at the highs will be doing everything they can to stay afloat owning inventory at these price levels.  Those that are doing whatever it takes to put a minimum sale floor underneath production are expected to see a reduced risk of exposure.  Some definitive formations are materializing in the index and futures. For the index, a trade above $261.88 will suggest cattle feeders can't get enough.  A trade under $256.67, and it will appear that cattle feeders are growing weary of paying top price.  For the futures, several of the contract months came to within pennies of July 10 low for which is believed the low of a wave 1.  The November contract broke it, suggesting the waves 1 & 2 are complete and wave 3 in progress.  The more contract months that trade under the July 10 low will add credibility towards the analysis of a wave 3 decline in the works.  Take a look at the weekly feeder cattle index and note the "you are here" tag.  When you have a good visual of this, consider who you wish to assume your risk at this level and then do whatever it takes to put a floor underneath your production.  If you wish to assume all the risk yourself, then that may be whatever it takes for you to stay solvent.  If you do not wish to assume al the risk yourself, call us and we can help.  Is it too late?  You are $3.13 from the all time high of the index, $9.45 lower via the weekly continuation chart of futures, and mostly $25.00 to $30.00 lower via specific contract month.  So, as you can see, the cash markets remain at the tip top, futures inline with cash, and you have lost $20.00 to $30.00 worth of futures premium that may not ever be available again this year. ​​

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Hogs:

​Hogs were sharply lower with the index higher, up $.46 at $91.85.  ​​​

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Corn:  

 Grains resumed their down trend today with a gap opening in the corn and new lows in beans.  I expect more of the same.  Silage is and has already been chopped in some areas with a great deal of crops 1 to 2 weeks earlier than the three year average, with expectations of yields to be near record in some areas. Beans appear to be in good shape as well, putting them at less risk for frost.  I continue to expect grains to trade lower. 

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Energy:

Energy was sharply lower today with all three exceeding last weeks low from which a monster rally on Thursday and Friday pushed and closed them at the highs for the week.  Hence with all three now trading at new lows from last week, it appears that last weeks trading was a hesitation before resumption of the down trend.  I expect energy to continue to trade lower with a recommendation to go hand to mouth for the time being in fuel needs. This is a sales solicitation.  ​​​​

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Bonds:

​Bonds were firm today.  New highs over last week continue to lead me to expect higher bond prices.  With more signs and signals of consumer contraction in spending taking place, the Fed's actions may actually be starting to overcome this administrations spending spree.  ​​

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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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