“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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9/11/2024

Live Cattle:

I don't expect near as much directional trading as I do convergence and divergence of basis.  Seemingly, although we are quite a way from running out of inventory, we are starting to see signs of the live animal import aspect starting to dwindle.  I don't expect beef imports to change much, but the live aspect coming in from Mexico and Canada are believed stretched.  So, the agenda is believed to have kept number of cattle on feed elevated, along with beef imports, that helped to mitigate some of the loss of beef cattle.  With the cattle aspect now showing signs of slowing, it would suggest that the start of '25 will be with less slaughter inventory.  Especially if liquidation is complete and expansion begins sometime in '25.  That won't make much difference for the remainder of this year as ample cattle on feed, at heavier weights, and larger imports of lean beef has kept the consumer without want, but at a higher price if they did want it.  So, a tale of two cities.  One is ample cattle inventory and beef production into January, with the other being potentially short of inventory through most of '25.  Today, it is about basis and how close futures traders will push futures to the level of cash.  I continue to believe that a $2.00 to $3.00 positive basis will be a place to start.  At that point, if you wish to lessen the premium by selling a call option, I think you could get very close to cash, or maybe a dollar or two above. ​

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Feeder Cattle:​

​If there were any negative fallout from last weeks Anthrax arrival in last Thursday and Friday's trade, it has yet to show up in the index.  The index was a fraction higher today and holding at around the $243.00 area.  I anticipate the index to move towards the $250.00 to $252.00 area.  At that point, basis may not have changed by much, but it should help to have pulled futures up by the same amount.  I continue to expect less directional trade and more volatility as basis is wide and aspects of the future a little cloudy.  So, what we don't know is whether cash moves to futures, futures moves to cash, or they meet in the middle somewhere.  What we do know is that basis will converge and for cattle feeders, the basis spread is of benefit to you.  For the backgrounder, it is backwards with the goal to achieve being how close the futures can get to the higher cash price before taking action.  At the moment, I am going to be expect cattle feeders to use the $20.00 break in prices to acquire inventory, potentially keeping the basis firm, if not firming.  That would probably keep futures traders a little more on edge with the basis this wide and cash holding its own at the moment.  

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​Hogs:

​Hogs were firmer.  The lean hog index is down $.18 at $85.56.

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Corn:  

​Beans were firm, corn a tad higher and wheat higher.  Thursday's WASDE report is not expected to have any surprises in it.  Talking with Brian Hoops this morning, he believed there would be some actual data to be reflected in the report.  If so, it would be in the southern portions were a great deal less weather issues were seen.  When the combines roll in the north, it may be a little different scenario.  So, I think it possible that corn may trade lower as harvest gets underway, but a new low in corn would have me looking to fix some variable feed costs for producers.  ​

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Energy:

Energy rallied today.  Although unable to exceeds Tuesday's high, it was a sharp rally nonetheless.  I continue to expect energy to trade lower and were diesel fuel to move back towards Tuesday's low, continue to top off farm tanks and book fall harvest fuel needs. ​​​​

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Bonds:

​Bonds were higher again today.  Bonds are expected to continue higher.  Although I believe last night's debate to have been a little worse than two 3rd graders squabbling, they both made some points that lead me to anticipate both would have great propensity to cause another bout of inflation.  In my opinion alone, I see Trump and capitalism as an inflationary aspect due to damaging commodity prices in order to achieve a higher spending level for the consumer.   Cheap gas and cheap food tends to have the consumer able to spend on other things than fuel and energy.  He touted more than once his agenda for tariffs on China and making the world pay for all the US help. That last part reminds me of attempting to get blood from a turnip.   With Harris, it will be expected that printing more money to sustain current subsidies, a few new ones, and any attempt to build government housing, will inflate the costs of, to no telling what.  So, due to my beliefs in cycles, it is possible we have seen a wave 1 burst of inflation, a wave 2 attempt to quell such, with the next most probable move a wave 3 of inflation. Probably more than you wanted to have to consider, but in 2 months, one of these individuals is going to be in office and try their best to make a statement in policy and action as quickly as possible to help prove their points.     ​​​​

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