“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

​11/1/2024

Live Cattle:​ 

In my opinion, significant trading volume erupted into massive volatility in multiple markets on Friday.  Cattle were not to be left out with a great deal of volatility and price expanse this week.  Monday and Tuesday of next week are expected to be very volatile as traders, producers, and consumers window dress and shore up positions before the election.  This week's price action was a little out of character as futures sold off sharply and cattle feeders bid inventory to produce a new high for the feeder cattle index.  The significant divergence taking place this week has seemingly been very beneficial towards producers that have hedges on.  Cash higher and futures lower is taking advantage of both sides.  This week saw further increases in open interest with seemingly few longs in a profitable position.  The continue build in open interest reflects a significant position for both participants.  That being, new longs are in the market at, or very near the top of the known price range, while shorts sold the top of the known price range, with a quick reward showing up by weeks end. Whether it lasts or not, or we see cattle prices soar or plummet, it all boils down to who you wish to assume your risk and to what extent.  Living with the consequences of decisions is believed easier when marketing at or near the top of a known price range.  How you manage the assumption of risk determines the derivative used or nothing at all.  Although basis spreads have changed dramatically, opportunities continue to present themselves for those seeking help with managing their risk.  At this juncture, it appears there is ample to have to manage.  

The feeder cattle index made a new high in this recovery of the decline from $261.88 to $239.53 this week.  At present, it is slightly above a 50% retracement level.  Everything hinges on the cattle feeder going forward, for if they start to lower bids, the index will soften. Boxes have already begun to soften in expectation of inventory needs filled for the coming holidays.   A reason for expecting lower bids is drought.  Drought continues and even with this week's rain, it didn't do a great deal.  I expect a slight increase in marketing numbers for November and December due to this factor.  I spent this week attempting to turn variable costs into fixed costs.  For feed, it was the ownership of the $4.60 July corn calls.  The carry continues to suggest the board the cheapest place to store corn.  In energy, it was booking fuel, topping of farm tanks or owning call options on futures contracts.  Diesel went around the world and back the past two weeks.  Traders pushed it higher up to the 10/25 high, then sold it off abruptly by Monday's close.  As of this Friday's close, traders have already pushed prices above last Fridays high.  I continue to expect energy prices to rise.  I think it futile to predict much about next week.  Friday's unemployment report went above and beyond to reflect how big the government spending has become.  The private sector is believed reeling from inflation, while the government just keeps pouring out money in multiple different ways of forgiveness, credits, subsidies and the feeding, housing, clothing, and cleaning up after no telling how many illegal immigrants there are.  Lastly, as our analysis continues of the cattle market, I updated the August video with charts and the most recent information garnered to help decipher the next most probable move.  That can be found HERE.