“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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9/10/2024

Live Cattle:

​December fats continue to trade underneath the triangle.  Traders have been able to push prices to within barely the triangle lines, but unable to keep them there.  I think it possible that futures traders could push prices into the triangle to maybe test the August and first of September high.  This would narrow basis considerably were cash to remain stable this week. That is about all one can expect.  I don't foresee a futures trader willing to offer any sort of premium to producers.  So, seeing how close one can close the basis before acting is going to be the objective. Further evidence of the weakening US economy, and to some extent world economies, due to the significant drop in energy prices today that resumed an already established bear market.  Bonds continued higher as well and none of this appears to be reflecting an economy as strong as previously.  I continue to ask, how will consumer spending equal the past four years in which the government printed 3.5 trillion dollars that was handed out to just about everyone.  How does the US consumer continue to spend at that rate and how do businesses continue to reflect growth earning's when consumer spending has been declining.  Yes, I do realize that economic numbers reflect a healthier economy than what is perceived on Main Street.  It is possible that a recession is simply a self fulfilling prophecy due to aspects of when you hear of others having a difficult time making ends meet, one tends to contract in their own spending in fear of what may come to them.  Hence them starting to contract in spending creates the recession.  Nonetheless, I don't foresee an upcoming time frame in which consumers find themselves with the ability to spend with no consequences.   

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Feeder Cattle:​

Cattle feeders appear slow to respond to what appears as a very advantageous price spread in feeder cattle. Recent price action allowed for prices to be traded at levels very close to the December of '23 low.  There is not a great deal more I can say about the advantage the cattle feeder has at the moment, that hasn't been thoroughly hashed through.  It's the 180 degree flip from what was once the best friend a backgrounder had to now the best friend a cattle feeder can have.  These dramatic basis swings are producing and voiding opportunities in quick fashion.  Opportunities to capture higher or lower prices can come down to within minutes.  You have to be more prepared and on top of your marketing's if you are going to benefit from the divergence and convergence and swapping from negative to positive basis. This in no way suggests profits or losses, it suggests that opportunities are available to turn a variable input cost into a fixed input cost at price levels you can live with the consequences of.  ​

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​Hogs:

​Hogs were mostly firmer with October soft.  Pork production does remain elevated and as above when thinking about having to feed these critters, fixing the input cost of soymeal would something of importance to an operation. 

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Corn:  

​Corn and beans were lower. At this point, I think it as likely for corn and beans to move lower as higher.  With an initial move higher from the bottom now intact, we will have to wait to see if this is a correction of the decline, or the first move higher of more to come.  The start higher in beans leads me to anticipate a new low.  Were that to take place, one may want to consider locking in some feed needs into next spring.  While a rally may not be warranted, fixing the input cost of feed has the potential to help when setting other costs of production.  Bean meal continues to have my undivided attention with recommendations to own the $10.00 out of the money calls in the month you will be procuring feed in.  This is a sales solicitation. ​

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Energy:

Energy plummeted today.  Crude was down over $3.00 and closed down over $2.00.  Diesel fuel has lost $.61 from it's July high and $.31 since the August 26 high. With it tapping on the $2.00 handle, I think it time to top off fuel tanks and book fall harvest fuel.  This is a sales solicitation.  This is not to say or suggest I think energy is going to trade higher.  With carry in the market, today is the cheapest price and on a physical purchase, you may not be able to realize all of the price decline seen on the futures market.  ​​​​​

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Bonds:

​Bonds were higher again today.  Bonds are expected to continue higher.  Of something interesting will be the cycle of inflation.  The bout of came very quickly and then hung around as the 3.5 trillion floated to the top.  How do you say? Consumers were given money and they spent that money at businesses for which now have the money and are expected to continue to show stellar earnings so their stock price can remain elevated.  How though, will they be able to produce equal earnings if the Fed is attempting to shrink the money supply to slow inflation?  Quite a quandary to say the least.  As we see some commodity inflation come down, the next cycle will be low prices curtailing production, leading to the next commodity shortage down the road.  A lot to consider, but stay tuned for more, I am sure there is more to come. ​​​​

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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.