“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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10/8/2024

Live Cattle:​

Producers have had a friend to return.  The futures trader is now willing to offer premium over cash.  While not much, anything is better than the severe discount of only a few weeks ago.  Today's higher trade pushed spot October to reflect the second highest weekly close on the continuation chart.  Granted it will have to stay here or higher to make the mark on the chart Friday, but it is here today.  Of interest has been the loss of open interest from Friday's and Monday's trade.  A sizable decline suggest not as many were interested in this price level as others.  When considering the ability to market inventory into the future at the second highest price ever available, you have some difficult decisions to make on how much higher you think prices may go.   The spike high on the weekly chart is $195.65 made at expiration of the June '24 contract.  With September placements, the past 5 months of fluctuation of cattle on feed has been 3%.  At a peak in May and June of 11.6, they fell to 11.1 by August, and up to 11.2 in September.  If calculations are correct, the on feed number is expected to remain above 11.1 until into the new year. I don't think the market knows itself yet whether higher or lower prices are justified.  Therefore, again, the ability to live with the consequences of your decision will be as important as market direction.  Since neither you nor I know what the next day, week, or month will bring, being prepared for either is believed a way to approach the fat market into February.  That being, owning the at the money put option, leaving the top side open were further price advancement to be made. This is a sales solicitation. 

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Feeder Cattle:​

​Cattle feeders and futures traders both have made leaps and bounds gains from the summer highs.  Futures the most, having provided cattle feeders with what was a fleeting moment to buy cattle cheaper in the future than had been able to in the prior months.  The index is writing the story of the cattle feeder.  As this is impacted by cattle feeders only, there is no presence of influence from outside the industry.  The wave count is believed a top made at $261.88, a wave 1 or A decline to $239.53, and now what is believed wave 2 or B correction of wave 1.  A new historical high will void the current wave count, but I will be skeptical on whether to abandon hedges for a skies the limit mentality. So, we all have some decisions to make with what could possibly be the next most probable move, whether lower or higher. With prices so close to historical highs, and abilities to produce options strategies that can price cattle at or above the current index reading, I think it prudent you make some marketing decisions.  

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​Hogs:

​Futures were higher, the index was lower, basis is converging. 

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Corn:  

 Corn and beans were lower with wheat higher.  Corn and beans are believed forming a sizable trading range.  Wheat is believed making a wave 3 or C rally for which I anticipate a move of March Chicago wheat up to around the $6.57 area, a 50% retracement of the summer decline. 

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Energy:

​Energy was sharply lower.  The volatility and price expanse has been such that it leads me to anticipate more.  Big market movements tend to lead to bigger market movements and I can't imagine either side in the Middle East to give an inch.  So, we can see that when bombs are being dropped, oil prices were going down on the belief the economy was weakening.   Throw in trouble and oil prices shoot higher. I have given up on attempting to see oil trend lower.  I expect further escalation of the Middle East conflict that will be expected to push oil higher and potentially create a commodity inflation impact that no interest rate cut or rise will curtail.  ​​

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Bonds:

​Bonds continue to push lower.  Inflation continues and is believed causing significant financial hardships on more consumers every day.  With a belief that either candidate will inflate the US again, this may have well been just a minor correction on a long road to higher rates.  ​​​​​​​​

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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.