Shootin' the Bull about a good day to conduct business

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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9/20/2024

Live Cattle:​

In my opinion, a great deal of opportunity was presented this week to get some marketing done at price levels and basis spreads previously unavailable.  As a very welcomed participant, futures traders came out in droves this week to swap, equal, or narrow basis in both fats and feeders.  Producers were able, and recommended, to use this week's gains in futures to produce hedges at basis levels not seen in several weeks. Of the most importance was simply the increase in open interest this week.  The most recent price range is believed interesting simply due to basis spreads now for sellers, and buying most likely of simply following a short-term trend higher.  This week's rate cuts are not expected to be felt in the cattle industry, or very much by the consumer.  Even if the rate cut does filter down to impact the industry, it would take a few months before noticeable.  The agenda continues to hum right along in the back ground.  This agenda has kept beef production from being down the estimated 9% to 10% most had anticipated at the start of the year.  Even though this has been an achievement of monumental scale, it has begun to produce some unintended consequences.  The most prevalent to be seen is a reduction in receipts of cattle coming across the Mexican and Canadian borders.  Live animal imports are believed what has skewed multiple placements guesses for which were in the 97% to 98% range and continually coming out at 100% to 101%.  I believe that it was the imported live animals coming across the border and placed on feed with little attention paid that skewed the trade guess.  Were the August placement figure to be closer to the guess, then it will be assumed that fewer cattle are coming over the borders.  The beef/dairy cross will continue to simmer in the background with more going to show up in the future.  The sectors producing these are believed to have invested significant working capital that suggests a long-term venture. With weights not likely to increase by much more, I think we are seeing what US beef production, including all of the agenda, can produce in a year. That leads me to lean heavily on aspects of consumer demand.  Note that resilience has been stated multiple times, by multiple analysts, about the consumer. Were that resilience to break, I would expect sharply lower beef prices.  If it remains, then we may actually inflate again.  Whether that be to new highs, or only a correction in a down market is yet to be known.  With the significant changes in basis this past week, I recommend you use such to help you manage the price risk, inherent to commodity production.  

Grains and oilseeds simply held their own today.  Corn was softer at weeks end and beans status quo.  I am friendly towards beans and wheat, and remain negative on corn.  On farm storage has emboldened a great number of farmers to store and hold.  It makes sense, until you see the money you could be making, while watching the corn in those bins lose money.  While this current supply/demand equation could simply work itself out, it doesn't tend to happen that way.  I expect a flush, one way or the other, that would either force sales from famers, or force purchases from end users. As it is, the stalemate will continue.

Energy prices remained firm all week.  Most likely the episode of poor pager quality may have impacted oil due to the region in which the pagers failed.  I continue to expect energy to move lower, but am clearly fighting a losing battle at the moment.  Of the most interest remains the lower price of diesel fuel.  Even with harvest at hand, and rail traffic improved, diesel fuel continues to move lower, a signal that the industrial manufacturing and distribution sectors remain weak. Bonds topped when the Fed made their announcement.  It felt like the classic, "buy the rumor, sell the fact", we have all read about in our investment learning.  The action taken is difficult to assess.  On one hand, the lower rates are a stimulus, with investors and businesses able to use the change to buy more things with on borrowed money.  On the other hand, it is a reflection of economic numbers masking what is being felt on Main Street.  There should be no reason to lower rates if there were no one struggling.  However, there are, and most of us have seen or heard of, a business slowing.  I continue to believe the wave count to be correct on inflation.  After 12 years of deflating and then negative depository rates, a wave 1 of inflation was sparked at the doling out of 3.5 trillion dollars. The wave 2 correction of inflation is taking place at the moment, but upon the same or new leadership, both are expected to inflate, if for no other reason than they do not want their administration to be the one tagged with recession or worse depression.  So, a wave 3 bout of inflation will be expected.  I do not have good indications yet of when wave 2 terminates and wave 3 begins, but with no way at the moment to equal previous spending levels, more money or jobs will have to be created to do such.  Printing money, or encouraging labor participation would help to inflate the US again.  Lastly, this week gut punched me.  I have discussed the illegal immigrations, simply due to the impacts on our economy they have made, and impacts on the economy are impacts on cattle/beef production.  This week though, the city of Chicago has recommended they merge the city's homeless agencies with illegal immigration agencies to create one big agency to take care of all.  The act of taking away one's identity of being a US citizen, and attempting to give this status to someone who is not, is another step towards massive socialism or communism.  Make everyone the same whether they are US citizens that have paid taxes, served in the military, or were just basic good citizens for their community.  Conformity is now taking place with the city of Chicago leading the way.  If you want a good read over the weekend, read "The Art of War" by Sun Tzu.  In it, you will read of ways to conquer enemies through dilution of society, bringing in outsiders that taxes current services, as well as through conformity and terrorism.  I would urge you to read this and attempt to draw your own conclusions as to how closely the current path of the US relates to some of the ways enemies attempt to conquer. If you can read this, and "The changing world order" by Ray Dalio, you may find these waters we are in are not as uncharted as I may have thought. 

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