“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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3/21/2024

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Live Cattle:

For whatever reason, futures traders didn't like the look of owning cattle at the past 5 day's high.  I think that enough information has been revealed that it would be more neglect to not see what is transpiring.  The cement of the agenda to ration cattle to keep beef prices from becoming unaffordable is believed setting.  It will be more difficult now to stop any line of import, less likely to increase exports with beef even higher now, more likely to increase weights and no doubt with the headline news of the profit margin in dairy/beef cross, this too will continue.  What is the goal? Produce and import as much beef as possible to keep from losing consumer demand due to high beef prices.  

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Feeder Cattle:

Of the above stated, each will impact beef production by a percentage of what has been and is being lost.  The longer it takes for cow/calf producers to expand, the more solidified the agenda becomes, leading me to expect it to start producing an increase in beef production.  Once, or if, expansion begins to materialize, then we will see what percentages the alternatives can make up.  Until then, every pound imported, pound not exported, and no heifer retention keeps more beef for domestic consumption.  

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The inability of traders to post an outside engulfing pattern is expected to weigh heavily on technical traders minds tonight. Again, watching the spreads and back months not having more premium, as many believe cattle numbers will only get smaller, is a key indicator as to how willing someone else is to assume your risk.  At present, they are seeming a little skeptical. 

Hogs:

Hogs were  lower.  The index was up $.39 at $83.21.  Hogs broke hard today.  I expect some convergence of basis. From the speculative standpoint, my recommendations were wrong.  From a hedge standpoint, so far, the best the hog farmer could have done is around the $103.00 area.  This is the level the short call option strike was recommended to sell for the other side of the fence options.  With the $20.00 wide basis being about all there has been to begin with, having captured that already with the spread is anticipated to produce the result anticipated.  That being, capturing the $20.00 basis with full downside protection. Again, not the best in speculation, but hog producers that used this strategy to hedge are expected to be rewarded with the basis spread. 

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Corn:

Grains and oilseeds just aren't going down.  While they are slow in making gains, they are making some gains.  I think it will take a shift in improving basis or a higher price to see farmers turn lose of any more product at the moment.  

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A strategy to consider, if apprehensive about marketing at a specific level, would be to own the call option on the month and strike price you wish to make sales.  I have heard this coined as a "courage call".  It allows the owner of the call to market physical inventory while maintaining a long position via the call option.  Hence, were prices to continue higher, after the cash sale, the owner of the call continues to benefit from the higher prices.  Were prices to plummet, the loss of 100% of the option may be possible, but you have marketed your physical product at the price level you desired. 

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Of course I do know that when asking where you want to market, the standard answer continues to be "at the top". 

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Energy:

Energies were lower but clawed back a large portion of the losses.  I expect energy to continue higher.  The Fed's dovish stance is believed to allow inflation to run a little hotter and hopefully destroy more money and the consumers ability to spend.  The poor energy policies directed by this administration just keep getting worse.  Aspects of tail pipe emissions being lowered dramatically suggests a large push to advance electric car transportation.  Along with their immigration policy, November can't get here soon enough. I anticipate energy prices to continue to move higher.  Of one good thing has been that gasoline has led the way instead of diesel fuel.  Hence the most recent rise in gasoline has been $.20 from the 3/11 low to today and diesel fuel $.10.  Both were higher earlier in the week.  

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Bonds:

The Fed's remarks have been pretty much labeled dovish.  Gold has moved to new historical highs and bonds just sitting there. I believe that the Fed is going to hope the current bout of inflation helps to ration items to a point in which spending is curtailed naturally. Hence why they did nothing.  I think at present, the continuation of doing nothing, or worse, a rate cut, would simply lead to a buying frenzy.  Last, but not by the least, I would not put it past this administration to push through some sort of further subsidy package, or the illegal immigrants invading the US.  

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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.