“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

​12/4/2024

Live Cattle:​ 

Open interest continues to be the most interesting aspect of this time frame due to a belief of significant commodity fund participation.  Producers marketing or hedging with futures or options may or may not be marketing at the high, but if hedges, they will be marketing inventory within a predetermined parameter decided upon when executing the position.  The commodity fund, presumed long the market, is in a speculative position for which only a higher price than he paid would produce a profit.  With the increase of open interest, suggesting more are interested in these price levels, I urge cattle feeders to continue to scotch every step higher the fat cattle market goes.  Every new placement is recommended to have a long put option underneath it.  This is a sales solicitation.  

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Feeder Cattle:​

With opinions being formed of fewer placements in the November time frame, I agree.  I saw the volume of sales for stockers and feeders have been lower through the month of November.  I am unsure this will make much difference as it strengthens the idea of more cattlemen than cattle. We already know that and it begs the question, "how badly do you want to be in the cattle business"?  If you do, and you are assuming the risk of ownership of historically high priced inventory, I recommend you scotch every step higher the price makes.  If the gavel slams and you are the one owning those critters your next step is marketing them.  

Today's price action is not believed definitive towards a reversal.  It would not surprise me to see a new high of the futures.  If so, I think this will be a 5th wave.  Of what magnitude is undeterminable yet, but were this to materialize, I will recommend every head out to November of '25 to have some sort of price protection underneath it.  I continue to believe that prices traded in current time frame could be the highs of next year's summer and fall feeder cattle.  I understand this sounds almost as unrealistic as it was stated that beef production in '24 would equal or exceed '23, when it appeared there was no way it could even come close.  Well, it did and with the agenda still simmering on medium in the background, steady beef production is expected to continue. Aspects, ideas, or actual data that confirms expansion taking place may only produce rallies in a bear market for which when expansion starts, it also can call an end to the shortened supplies of cattle with uncanny accuracy.  Keep this in mind, futures can turn south and run sharply lower before the index ever budges.  Similar to what we saw from July to September of this year.  Futures plummeted, but when the index did not, they converged with the index.  It is as possible that were that to take place again, the index could as easily trade down to the levels of futures.  This is a very active time frame for which historically is not.  Therefore, while the talk is hot, and prices are high, I can't help but recall the old saying of "buy low and sell high".    ​​

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​Hogs:

A lot of recent talk of the commodity fund position in hogs.  I think hogs made a 5th wave high on 12/3 and expect a large price decline to converge basis to the lean hog index level.  I recommend owning the at the money or two dollars out of the money put options in the April contract.  This is a sales solicitation.  I recommend hog producers to buy the at the money put and sell the $10.00 out of the money call in the 3 summer months of hogs.  This is a sales solicitation.  The lean hog index was down $.30 at $84.06 today.  

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Corn:  

Soft all the way around.​

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Energy:

​Energy took back most of Tuesday's gains, continuing the sideways trading into a pencil point. I continue to expect energy to trade higher.  If I am wrong, and energy begins to break back to the downside, I will be very fearful that other commodities will follow suit.  ​​​​

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Bonds:

Bonds were lower to start the day, but after Powell spoke, they were plus on the day.  I am unsure of bonds next price direction, but for the moment, they remain in a down trend. ​The US dollar is down a tic as I write this.  ​​

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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.