“Shootin’ The Bull”

End of Day Market Recap

by Christopher B. Swift

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10/7/2024

Live Cattle:

The flurry of higher trading will be put to the test this week as to whether it can hold, advance, or fall back.  At present, with basis evened, there doesn't appear too much taking place as the price gyration of beef has been from prices coming down from exceptionally elevated levels, and cattle simply conducting business.  Futures have done little more than kept basis converging.  So without further advancement or decline of cash, there isn't much to expect.  Looking out into the future appears futile as consumers are being tasked consistently with shifting in discretionary spending due to volatile fuel prices and a dramatic reversal higher in energy prices, and interest rates.  Both of which sap money from consumers.  

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Of interest is the price of futures.  On the weekly continuation, close only charts, when the new weekly high was made, it did so at a close of $187.45 9/22/23.   The price declined and came back up again on 3/1/24 to close at $188.50.​ The price declined again, and this time made the current standing high close of $193.50.  Once again, the market declined and here we are again at today's close spot October at $187.85.  I think a lot of good things will have to take place in order for the consumer to increase consumption, or willingness to pay a higher price, in order to get fat cattle any higher.  For the moment, it appears that the just under $188.50 is significant resistance with the current historical high a very sought after level to attempt to break. 

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Feeder Cattle:

I have updated the feeder cattle index chart.  While questionable, and subject to interpretation, there are 5 waves up from the low made on 9/20.  While there is not a doubt in my mind that the index can continue to trade higher, I am not so sure it will.  This is believed, until proven different, a corrective wave 2 or B from the initial decline from historical high. The current retracement high is already .382%.  A 50% retracement would be to $250.71.  Unlike the futures, where multiple participants create the price, the index only represents what cattlemen pay for cattle.  There is no speculator or AI quant trader spoofing bids/offers in the sale barns or video sales.  This is the price a human will buy and sell for with every aspect of economic wherewithal known to them before making those decisions.  Hence, unlike the futures, where a rank individual can create enough imbalance to impact the decision making process, there nothing more than whether you think there is margin in those cattle or not.  Long way around the barn, but there are ways manage price risk, allow for predetermined higher price, and maintain a minimum sale floor until the date of physical sales.  Your decision is mostly, can you live with the consequences of your decisions?  

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Corn:

Corn was firm, wheat higher and beans lower.  The beans are surprising due to harvest information suggesting poor yields in Iowa and other surrounding states.  Although it doesn't appear the bean crop was damaged by the east coast flooding, transportation and storage of could be impacted greatly.  Volatility is expected to increase, rather than decrease.  As the US crop wraps up harvest, South America goes into the ground.  The combination of both is expected to produce more volatility than price discovery.

Energy:

Energy was sharply higher.  I was just wrong as the bombs being dropped in the middle east is more of impact than slowing consumer demand.  So, this throws a monkey wrench in oil as without the bombs, it was going down and sharply, and with bombs it goes up sharply.  So, the price of oil appears dictated by one fundamental at the moment, bombs.  Since I am not privy to when they send those things flying, I have to move from being bearish to expecting the unexpected.  Shortly meaning, more volatility and in a very wide price expanse. 

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Bonds:

Bonds were lower again today as inflation is rearing its ugly head.  Inflation remains high and climbing, albeit at a slower rate, it is still climbing.  I hold no high cards in attempting to outguess the bond market, four weeks prior to the presidential election.  I think both will inflate significantly to keep from being the president blamed with recession or worse depression.  I know many think that it would take a long time to dispose of so much money that is sitting in retirement and savings accounts, as well as the wealth of companies for which you may hold stock in.  I don't think it would take long at all as most, even with money, spend what they make, or owe on everything they own. ​​​​

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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.