Shootin' the Bull about a little reprieve.

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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9/23/2024

Live Cattle:​

The work done on Thursday and Friday of last week is believed adequate for what is currently known.  Futures traders didn't disappoint in narrowing basis back for producers to market into.  Even packers paid a little more last week as well.  I have very little to go by in the attempt to contemplate the next most probable move.  Cattle and beef production will remain elevated into the 1st quarter of next year.  This year's beef production most likely accomplished a feat in equaling and at times, exceeding year over year beef production with fewer cattle.  Next year will be more interesting with again, fewer cattle, and seemingly a consumer for which their resilience may be running thin.   I have heard that word used multiple times by multiple analysts when describing how consumers can continue to spend at levels not believed able to.  Nonetheless, they are so far and it would be further shifting in consumer demand that would lead me to expect a price direction.  For the time being, having the opportunity presented to lock in prices without a discount, or too terrible of one, is of great relief.  Now my sights will be set on whatever takes place to move the market and attempt to maneuver in a manner that reduces initial premium paid for the previously recommended at the money put options in the December and February contracts.  The seasonal tendency for fats is a little firm in the month of October, before falling off in a zig-zag pattern into December.  

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Feeder Cattle:​

​Backgrounders got a small push higher above last week.  The evening of basis has come pretty quick, and could most likely skew some decisions.  It should not skew yours as you know what levels you can price cattle within that are equal to, just shy of, or actually just above current index levels.  Two weeks ago, you were staring at a $15.00 plus positive basis.  I hope these lessons on basis is helping.  If you are not going to use the futures or options markets, then basis has no meaning to you at all.  If you want to be directing your own marketing, on your terms, then I hope the lessons learned over the past couple of months has helped you understand how money can be made and lost with just a simple convergence of basis.  The past two months of swapping between excessively wide negative basis to a very wide positive basis, and now back to even, gives a good overview of what can happen and how it impacts both backgrounders and cattle feeders at various stages of width.  With current recommendations, and not a very good idea on the direction of the next most probable move, I will be searching for price movement to help reduce the initial premiums paid for the put options or options strategies.  Friday's on feed report just keeps finding more cattle to place than the guesses of the trade.  I even saw the lower receipts from Mexico and the placement number was still higher than expected. I think it will be difficult to reach the same beef production in '25, but could equal it.  I think as well that some expansion is already taking place due to the low cow slaughter.  Some are already doing a similar action as to was taken in '13 & '14.  That being, holding back cows.  In '13 & '14, this holding back of cows came along with the holding back of heifers, creating the large volumes to have to work through the next 5 years.  This time may be slightly different in that I am hearing of those $2.200.00 heifers begin sold, but holding the cow back if they thought she could make it through birth.  If so, the price of the calf would well offset the loss of the slaughter cow.  When combined with more beef/dairy cross cattle coming, what will be hoped for soon enough is that not too much expansion has taken place. 

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​Hogs:

​The index has stagnated and basis remains pretty wide.  I look for further basis convergence with futures higher and cash softer. 

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Corn:  

​Grains and oilseeds got up and out of here today.  All three were stellar performers.  These are new highs for beans and adds some credibility to last weeks recommendations to own beans and previous ones to own soymeal calls.  I continue to believe corn will create a trading range with wheat and beans advancing.  ​

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Energy:

​Energy made another new high from the lows two weeks ago.  The lower close in energy is believed the start of a resumption of the down trend.  I get the feeling that some took last weeks Fed action as a stimulus.  I too believe it could be taken that way.  However, in the long run, I think it reflects the spread between what government reports reflect and how bad the inflation is impacting the majority.  Hence, the weaker spending of the so far resilient majority will be believed to overcome the government reports, reflecting a much different picture than most of us see.  Long way around the barn, but I would expect the "risk on" type environment seen today to fade quickly back into contraction. ​

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Bonds:

​Bonds were soft today and set a new low from contract high.  I think this rally is the completion of a wave 1 or A with a wave 2 or B correction now anticipated.  I expect the US dollar to resume its down trend soon, after the large bout of volatility seen last week.  ​​​​​​​

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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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