Shootin' the Bull about other markets influence

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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7/30/2024

Live Cattle:

Not much transpired in the cattle market today, but other markets are on the move.  Bonds are higher and only lack 12/32 from a new high from contract low.  Energy was on the move lower in what is expected to evolve into a bear market. Grains continue to be lower as increased production has been recognized by all. Of interest is that the movement of these markets is believed due more to lack of demand than greater supply.  Grains and oilseeds may be the outlier of this, but there has been significant loss of demand for US grains, as well as this years elevated production.  So, more are taking notice that beef production just didn't fall as much as was expected.  In my opinion alone, I believe that high prices brings forth innovation and a plethora of alternatives.  The innovation of ability to handle larger carcasses and the beef/dairy cross are working hand in hand with the alternative protein sources, and significant shift from cuts to the grind. Everything is being done to satisfy the consumer demand without dampening it further. Cattlemen though appear still aggressive in both their bullishness and actions as seemingly the consumer and outside market action are suggesting the consumer may be close to shifting aggressively to an even more conservative stance.  With ability to hedge inventory, and these comments full of recommendations to do such, cattle feeders should be in pretty good shape to weather what storms may come. 

​Feeder Cattle:

January feeders came to within less than a dollar of moving to a new lower handle.  The loss of premium in the back end is dispelling fears of fewer cattle.  The current price is believed pushing some to sell today and worry about tomorrow, tomorrow.  Regardless, the agenda has already passed a milestone this month by going beef positive.  The industry has pulled out all the stops to keep the consumer in beef and has done so to a point in which the higher prices for cattle are beginning to subside.  While some continue to disregard the impact from dairy, and will continue to impact beef production, one has to consider the efficiency of one over the other. While only approximately 1/5 of the beef cow herd, the efficiency and growth of are expected to carve out a niche of beef production that won't go away, and is expected to grow with so much capital being invested into the beef/dairy cross.  Note the loss of enormous negative basis spreads, the discounts of next year's contract months, and everything possible being done to curtail the decline of beef cattle impacting beef production, it looks to me like things are changing.  Will the changes make prices go higher or lower?  I have little reservations in stating that I doubt they will remain here for much longer. ​​

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Hogs:

​Hogs were lower.  There is a negative seasonal tendency that ends towards the end of August in December hogs.  The basis spread is wide and may produce an opportunity to own December futures with expectations of narrowing the basis.  The current rally and correction of is believed a wave A and B.  Upon completion of the B wave, I would anticipate a C wave rally to at least being to narrow basis by futures moving towards cash.  Keep this on the front burner for a recommendation if becomes applicable. ​​​

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Corn:  

Carry, and not that much of, is about the only higher prices farmers are expected to see anytime soon.  A dead cat bounce may come at some point, but with storage capacity as is, it won't take long when harvest picks up to see some "have to" selling.  Beans and corn are believed to have resumed their down trends with a downside target for December corn at $3.80 and November beans at $9.80.  

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Energy:

Energy was lower again today.  I expect energy to continue lower.  A trade under the June 4 low per gasoline, crude, and diesel, will lead me to believe a down trend has formed with expectations of crude under $70.00 and gasoline/diesel fuel, another $.30 to $.40 lower.  ​​​

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Bonds:

​Bonds were firm today. From today's high, there is only 12/32 before reaching the top made after contract low was formed.  I don't expect much from the Fed's FOMC announcement on Wednesday. Verbiage will be listened closely to in an attempt to glean clues from on when or if they will lower.  While I may be way off base, but I think the Covid high is over with and the money strewn to the wind caused significant allocation of funds to consumers, items, or businesses that may not have been privy to under any other circumstance. Companies were growing because more money was being printed.  With only the mainstay now being printed, some of those companies are meeting earning's expectations and consumers are believed having to back track on some spending they were able to under previous economic conditions.  Long way around the barn, but throwing out free money causes consequences that I believe we are about to find out what those are.    ​​

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