“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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4/1/2024

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Live Cattle:

While blame will fall on the bird flu, I do not believe that this is the issue.  The issue is the same one that started in June of last year when profit margins for cattle feeders peaked at just over $300.00 per head.  From that point forward, cattle feeders saw profit margins erode to $300.00 per head loss, that today has been whittled down to just $182.00 per head loss.  The traditional ways of buying a feeder steer and selling a fat are pretty much gone.  If not privy to carcass premiums or beef sales, then losses continue to mount.  This time frame is of discovery.  We are in the midst of discovering how low our cow herd can go before recovery starts, discovering there is a lot of beef else where's than the US, and discovering that you can grow the cattle bigger, and if push the price high enough, some stop buying, or swap to alternative cuts or products.  We are still very much in this discovery stage.  The triangulation of price continues and is expected to.  Another day like today and the next up trend line will be within sight.  

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Feeder Cattle:

I have heard repeatedly today, "this is the reason you hedge".  While I can't argue this, I'll add to it.  Today's decline is not the reason you hedge.  The reason you hedge is to obtain a known price for your product in which you have no way of knowing what the value is until physically sold.  Period.  There is no other reason to hedge, or forward contract.  The triangulation continues in the feeders with approximately $5.00 to $10.00 more to go to reach the next up trend line, depending upon contract month.  I know all are disappointed in the bird flu being the news that displayed the obvious.  That being, margins evaporated and buyers quit buying.  I recommend you be careful pointing the finger of disdain at the futures traders now.  I have written extensively of how fortunate producers have been to have the futures traders post such enormous premiums for you to enjoy.  The disdain comes to those who chose to ignore them or worse, berate them when market action wasn't to the bulls liking. The table is turned now with a stark positive basis to deal with when marketing through May.  In the August and out months, the basis spread charts show just how much there was to gain, and now, how much you have lost.  Your business, like mine, is built on relationships that weather all storms, not just when the wind blows the wrong way. 

I recommend buying back all short call options and have the decision made as to whether you wish to now form a bear put spread, by selling a $10.00 out of the money put, or simply sit with the put option until the gavel slams on your inventory.  This is a sales solicitation.    

Hogs:

Hogs were sharply higher.  I great trap was set and sprung this morning when the seemingly neutral to bearish hogs & pigs report had traders open the market down a dollar plus and within the next 5 minutes plus on the day.  From there, it was straight up.  No short had a chance, and more likely than not, the bears fueled a great deal of the rally, having to buy back shorts laid in throughout the past two days price scale. 

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Corn:

I continue to recommend being long July wheat with a sell stop to exit only at $5.42.  This is a sales solicitation.  I recommend entering into a long Chicago December wheat and short December corn spread with a mental stop to exit on a close of wheat over corn at $.98.  This is a sales solicitation.  I expect wheat to trade higher with corn and beans to meander.  

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Energy:

Traders fell shy of $.47 from making a new contract high in the May crude.  The products were slow to catch up, but all did by the close but the front month of gasoline.  Energy is expected to move higher.   

Bonds:

Bonds were sharply lower, because we still have a bout of inflation and it hasn't cured the spending habits as first thought.  Hence, the bonds lower. 

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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.