Shootin' the Bull about how much higher.........

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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6/18/2024

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Live Cattle:

With cattle, boxes, and some of the grind at the tip top of yearly and historical highs, what's next?  Even higher prices?  Rationing has already taken another large step the past two weeks with boxes at yearly highs and cattle and some cuts at historical highs.  You know what isn't at historical highs?   The futures market.  No trader is willing to pay you what they are bringing at present, but discounting you going forward on those historically high priced feeder cattle today.  This bull market has some age on it, is at the top as we know it, and a consumer being challenged daily with volatile fuel prices and every other aspect of this inflationary environment the Fed can't quite seem to quell.  Know that this is their intentions, and cattle/beef prices are believed as much in the crosshairs as every other aspect of the inflation. 

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Feeder Cattle:

I would like to be as confident in believing the cattle feeder will just continue to bid higher as others, but I am not. Therefore, I make recommendations that will produce a higher sale price if achieved, and lock in a minimum sale floor regardless. There is not much other way to look at.  A conversation this morning leads me to believe that corporate yards are full and will most likely remain full.  Others could be at 80% or under.  The dairy/beef cross continues to grow as well.  The video sales are around the corner, along with the doldrums of summer.  I think a lot of producers are holding their breath to get through the video sale without a decline in prices.  If you manage risk, you can breath easier due to the known outcome of marketing based upon the decisions you made and consequences you were willing to accept.  Other than this, the market will make those decisions for you, not you.  

Feeder cattle prices continue to contract.  Futures traders were unable, so far, to push prices outside of the triangle.  As well, they appear reluctant to provide premium for you to market into, as they did so willingly in the past.  The agenda to ration beef to consumers in an attempt to keep profit margins from eroding and not do too much damage to the cow/calf producer, so they can rebuild at some point in time.  At the moment, the spread between cattle prices and desire to stay in the cattle business is such that some are having to rethink how bad they want to own cattle. In my opinion alone, I believe the agenda is also helping to deter further growth in production as we see more rules, regulations, and desires for there to not be cattle.  Hence most likely further exploration of the dairy/beef cross and potentially, no need to expand.  If the price stays high for much longer, I fear the loss of some beef demand that producers have worked so hard to retain. As well, more will be imported and potentially a greater divide between cattle for cuts and cattle for the grind. 
 

Hogs:

The lean hog index is believed to be reversing.  A trade under $90.00 will lead me to expect a move towards $80.00.  That would be a little less than a 50% retracement of the move up in the index.  Hog futures were lower to sharply lower. 

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Corn:  

Corn and beans were a little firm at the close, but I believe traders are merely marking time as the crop grows. Corn is the most interesting as it appears it is in demand, no one wants to pay for it and on farm storage a slight advantage to the farmer.  So, it will most likely take something that suggests the crop is made, bigger than expected, or the stocks to usage ratio changes, in order to see some significant price fluctuation in corn.  I think beans are headed lower and with acres expected to go in behind wheat, there should be a large acreage of them.  A lot of disappointment in the bean oil.  Earlier this year the start up of more crushing facilities and hopes of a bio-jet fuel gave high hopes for bean oil, but has since fizzled.  

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Energy:

Energy is sharply higher again today.  Of the $12.13 decline in crude oil, traders have taken back all but $4.24 of it. The volatility in crude and the products, along with the price expanse, makes for a very uneven production model for a lot of business that use energy.  Farmers have seen a $.40 rally in diesel fuel going into planting and experiencing a $.46 drop at the end of April and now back up $.25.  That is a $1.10 move, up and down, in diesel fuel in the first 6 months.  This bout of energy inflation is not going to help the consumer.   

Bonds:

Bonds are higher, even with the seeming increase in commodity inflation.  The Fed excludes food & energy from their inflation calculations due to the volatility.  I think this is why bonds are still moving higher, because economic numbers void of food & energy are subsiding, while commodity inflation, energy, cattle, cocoa, and gold are at the tip top of their yearly highs, or historical highs. I expect bonds to continue higher. 

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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.