Shootin' the Bull about breaking triangles and further rationing

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

​

5/22/2024

​

Live Cattle:

Traders were able to push June out of its triangular pattern, but back months are a little slow in achieving the same.  Rationing is now a noticeable factor, and acceptable term in the cattle and beef markets.  Randy Blach, of CattleFax, stated it well this morning while appearing on RFD-TV.  Rationing is something that I have not only never heard of in the cattle/beef market before, but seen until this weeks features came out with beef listings at 19%, dead last in a category of 4.  The most surprise of this?  Seafood was the main feature.  So, while the industry continues to grapple with razor thin margins, if they exist, and expectations of sky high cattle to help offset the enormous price paid for feeder cattle, consumers, and those who sell to them, are taking a different route. Featuring other protein items is expected to curtail some purchases, but in all actuality, the consumer has already spoken with their shift to hamburger. There is no evidence or seeming attempt to bring prices down to the consumer.  Therefore, rationing continues and will until consumers purchase less beef, or cattle producers increase production.  This weekend's movement may go a long way in helping to decipher how the remainder of the summer will go.   

​

Feeder Cattle:

While still dollars from meeting the down trendline of the triangle in feeders, traders were able to push prices above the April 29 high.  I used this price point to lay off further risk while futures traders are so willing to provide premium, dollars over any price paid via the CME index. The trade of the index above $247.18 voids the minor pattern and sets the stage for an attempt at $251.82 made March 21.  After that, the only price standing in the way will be $254.10.  Cattle purchased around this level last year in September saw upwards of a $320.00 per head loss when sold as fats.  I recommend you lay off every thing you don't already have, or have recently purchased with a fence options hedge.  This is a sales solicitation.  Marketing parameters built upon today's close will produce in the September contract a minimum sale price of $259.38, $5.28 above current index high, and a maximum sale price of $269.38, $15.28 above current index high.  This is created with the purchase of the $263.00 put and sale of the $273.00 call for a premium of $3.62.  These positions are fully margined and have an unlimited risk above the short call strike price and unlimited downside protection below the put strike price.  Can you live with these marketing consequences?  That is the only question.    

​

Hogs:

Hogs were lower. Convergence is taking place.  

​

Corn:  

Corn and beans higher with wheat lower.  I think there is more seeds in the ground than many believe.  While the rains may delay a slight amount of acres planted, or there may be some replant, everything else will have a great start.  From what I hear, any dilution of fertilizer would be compensated with a side dressing that could actually promote a larger yield. I am not bullish corns and believe that your marketing's should be wrapped up in a marketing parameter that allows you to take advantage of a price move, either side of the current range by $.80.  The beans are expected to trade lower as well.  I believe you should have your marketing parameters in place with expectations of a lower trade.    

Energy:

Energy was lower today and has resumed its down trend with a new low close today in the July crude oil.  Diesel fuel lacks less than a penny and gasoline just a few tics.  With energy moving lower, it suggests the economy weakening. It will take a while for consumers to benefit as retail stores appear reluctant to pass along the $.33 decline from the 4/12 high. At my local pump, the price had remained at $3.35 for a month of so, then when prices moved higher last week, the pump price jumped to $3.40 and now back down to $3.35.  Everything is believed going to be slow coming down in retail price.   

Bonds:

So, what is most inflated at the moment?  Equities.  Next? Cattle/beef.  After that? probably still cocoa and gold.  No other commodity that I can find is anywhere near a historical level.  Not only that, the current economic environment is one that is laden with inflation for which the Federal Reserve is tasked to lower.  Although difficult, with the Biden administration fueling a great deal of the inflation, consumers are believed to be able to rein in spending to a point in which they can strive and businesses begin to suffer. Bonds are practically unchanged today.  I expect bonds to continue higher.  S&P futures made a new contract high by 1 tic today. The cash index has not as of yet. Is there any truth left to the old adage of "buy low/sell high"?  If so, there are few items to buy that are low, but some high flying commodities and stocks to sell.  

​

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.