“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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4/30/2024

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Live Cattle:

A great deal transpired today.  Whether you believe the price decline an aspect of the bird flu, or like me, believe that with no margin and fewer aspects of trading higher, there is no reason to pay more for anything, prices are lower.  I think they are mostly lower due to the increase in beef production.  Increased imports are expected to continue, and with weight gains now topping over 30lbs of last year, I think it possible that beef production could be equal for the year by July.  A slower slaughter pace is backing cattle up and the beef eating world is appreciative as box prices are believed to have topped and maybe, just maybe, inch down to just above the old high of $255.00.  The ability to have recognized the agenda being put in place, to achieve the goal of not running out of beef, or maybe what we are seeing now, consumer push back on prices, is believed to have helped many to positions themselves for the next year or so.  In my minds eye, I am seeing the US transition into a position that will encourage more imports.  The increasing costs to produce a pound of beef, outside of input costs for growth and health, is staggering.  With the mandated ear tags now, another cost will have to be absorbed by the producer, with no real way to offset that cost to the consumer in beef prices.  Water restrictions, and further carbon credit awareness, will continue to make it more costly to produce a pound of beef. 

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Feeder Cattle:

I expect more lateral movement of the herd this summer with expansion being attempted, but to some, the taking over of another herd is the same as having expanded.  So, this year may see a lot of cattle change hands, but I doubt a lot more cattle will be seen from these movements.  In another year, with hay production this year and improving pasture conditions, those lateral moves could be set for expansion.  By that time, I think the price of beef will have continued to sway demand, and imports difficult to relinquish. As well, the dairy/beef cross will have had another full year of expansion.  Of some interest to this will be that on a one to one basis, if there is a dairy steer to take the place of a beef heifer, the weight difference between the two will make up a significant portion of the loss of beef production. As of 4/29, from the USDA 5 area weighted average direct slaughter cattle, the current weight difference between a steer and heifer was 167lbs for the most heavily traded numbers of each.  If I am correct, and correct me if I am wrong, the dairy/beef cross will be even larger than the beef steer, hence the more of this cross in the mix, the more poundage they take up from the loss of the beef heifer.  I think this is significant and even though I have been writing about it for months on end, it is becoming more visible, especially with the triangulation in price starting to take form.  The industry has found a way to produce more beef with what is available.  

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Hogs:

There remains over $12.00 of basis to converge and today again, the basis diverged.  With limited time, either the futures will plummet, or cash soar, or they meet in the middle very quickly.  The counter seasonal price movement will become even more interesting as the next seasonal tendency is for hog futures to move higher.  Not to say the will or won't, but if they do move higher, the index will have to scream higher.  The current basis spread and seasonal tendency leads me to expect a tremendous amount of price expanse and volatility over the next few weeks. 

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Corn:  

Traders got busy today.  Whether farmers did or not is questionable.  There is not a great deal to add to the grains.  There is expected to be plenty of in storage, plenty of acres going to be planted, and questions about storage capabilities in the future.  There are few, if any drought aspects and the current moisture is believed much more beneficial than detriment to planting delays. The price of money is high and the price of grains are going down.  Reversing your position of stored grains to storing money is believed a beneficial swap.  Stored grain is costing storage fees, with the potential to lose further value.  Stored money is paying upwards of over 5%.  A quick pencil to paper will help to decipher which is the most profitable to you, as well, you can mostly likely calculate how much the corn, wheat, or beans would have to move higher in price to achieve what is available today placed on deposit.  As well, you will be stopping the storage payments. Regardless, I don't see anything to cause the funds to reverse positions, or anything weather or production wise that would cause a rally of significance.  

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Energy:

Energy was volatile and lower today.  Gasoline took it the hardest today, but diesel was not left behind and has resumed its down trend with new lows from the 4/5 high.  Crude came to within $,25 of exceeding its prior low.  Now with gasoline finally starting to break, the energy market is expected to soften considerably.  Potentially, another sign or signal of a weakening economy.  

Bonds:

Here is where the strange lies.  With literally everything suggesting some sort of softening, the bonds continue to be weak.  I don't understand this, but that is not uncommon, as markets can remain irrational for longer than one can remain solvent, or in this case keep from going crazy.  

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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.