“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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4/29/2024

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Live Cattle:

Not much transpired today.  Traders just don't seem to be willing to produce premium on futures contract for the industry to dump cattle on them.  With beef production down 2.6% year over year, there isn't much reason to.  At the rate of gain on cattle, believed improving performance of the dairy/beef cross, and imports pouring in, cattle prices at all time highs appears a little lofty to me. Nonetheless, traders are expected to keep prices within the current price range because there isn't few enough to send them to the moon, or is there enough of a demand notice to make them fall out of bed.  Hence, more price discovery within a defined range appears the next most probable move. 

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Feeder Cattle:

Literally ditto for feeder cattle as above.  The only difference in the feeder cattle market is that traders are willing to assume your risk at a premium.  Why, I am unsure, but they are, just not to the same tune as previously.  So, while they are willing to continue to do so, I think you have to make some marketing decisions based upon what is available, more so than what may or may not be in the future.  I expect after today's new high, traders may be less willing to pay the higher price. The index was higher today from the end of last week. I will be anxious to see how much higher, if any, cattle feeders will pay to play. 

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The current marketing situation reminds me of a story from one of Zig Ziegler's books.  The story was of a man rushing to a meeting through a torrential down pour.  Upon seeing his shoes, he side stepped into a shoeshine spot for a quick shine.  He told the boy he only wanted the cheapest due to it raining so hard.  The boy exclaimed that with the current weather, he needed the best shine in order to withstand the rain.  The man got the better shine because the boy knew the importance of the better shine remaining on the shoe until the destination reached, and tipped him nicely for the advice.   

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It's not raining in the cattle market.  Actually, the sun is shining very bright with prices just $6.92 from historical high in the feeder cattle index and fat cattle about $6.00 from its cash high.  So, while the prices are high, would this not be the time to protect them, instead of just getting something cheap or worse, nothing at all?   While only a dollar exists in premium to the May, the August futures are still $5.85 higher than the all time high of the index and $12.77 higher than today's index reading.  The October and November are premium as well, but when the 2025 year rolls around, futures traders are not producing any incentive above what is available today.  I think at best, traders push prices back to the down trendline of the triangle.  I think what will happen is a return to the lower end, and then maybe higher before the video sales get cranked up this summer. 

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Hogs:

The divergence that took place today is quite funny.  With only a few weeks to converge, traders are still above to push futures higher.  How? I can only believe it is some form of computer program that thinks just the opposite of humans.  That being, a known factor of convergence, and limited time would suggest humans would sell futures to produce convergence.  I think they do, but the computers, or their programmers,  know this and are able to pull bids and offers accordingly to create as much price fluctuation in the desired direction as possible.  Nonetheless, we know it will converge and hog producers still have the near $20.00 basis to work with.  

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Corn:  

Corn was lower, I expect corn, beans, and wheat to trade lower.  The wheat market is of the most interest due to the rally it just had.  This has been a little over a 12% rally in Chicago wheat and 15% in KC.  When considering debt owed, or the difference between paying storage on wheat and colleting interest on stored money, a quick pencil to paper will help to distinguish which is the better investment.  

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Energy:

Energy was volatile again today.   They all closed lower though and are expected to begin a trend lower.  The diesel fuel will be resuming its down trend, but gasoline and crude oil will just be getting started.  Tuesday will have a slew of reports that are expected to have an impact on energy prices.  

Bonds:

Those same reports will impact bonds as well.  Whether the Japanese currency issue was the massive selling in bonds, or something else, it seems to be subsiding.  With last weeks reports starting to shoe chinks in the armor of a weakening economy, Tuesday's reports are expected to be a little fuel on the fire.  

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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.