Chris Winward
10/4/2024
Cattle,Grains & Energy
In my opinion, this week's trade was influenced as much by headlines as much as fundamentals. With the port strike being at least temporarily resolved while negotiations continue, It takes one of the unknowns out that had many producers concerned about shipping logistics and how beef movement would have been affected by an extended strike. It is far from over as stopping automation of those terminals is the second big ask the longshoreman's union want a guarantee on to not happen with their new contract. This morning's Non Farm Payroll report showed job growth in September at 254k vs the expectation of 147k- a miss large enough to possibly quell concerns about the health of the US Consumer at the moment. Although revisions of those numbers are always a possibility and often happen later, that was the news that was traded by the markets in today's session. Cash cattle trade is still shaping up, but has started in Tx and Ks at 186 on light volume. Exports were up 68% over last week at 22,500MT with the biggest buys coming form China and South Korea.
November feeder cattle finished the week up over $4.50 for the week as the the rally which started on September 9th continued through today's close, adding $23 from low to high during that time. Today's index reading was 246.78, down 1.47. The Commitment of Traders report just came out and showed a build in manage money long positions in both feeders and fats as of October 1. Given the price action between then and now, I expect that position to increase in next week's report. The trend is still up, but I expect hedge pressure to increase at the $250 level on front months. We came within 10 cents of that today in the October contract.
For the week in grains, Dec corn finished up 6 3/4, Dec wheat up 9 3/4 and Nov beans down 28 1/4. News of much needed South American rains in the forecast weighed on beans, as did US harvest pace which has been picking up with favorable weather. Going into today's trade, funds are estimated to be short 56K corn, 56K beans and 18K wheat. The price action of corn and wheat surrounding middle east and black sea headlines this week was a good reminder of how prices can be affected by events across the globe. Both had big intraday spikes on Tuesday when the headline hit of missile strikes in Israel. China was on holiday, but there were a couple flash sales this week in corn and beans which are needed to stay on pace with the US export book. The US dollar is another factor in regards to US export pace. After reaching it's lowest level for the year on September 27th, it has since climbed from 100.157 to 102.496, the highest print since Aug 16th. The biggest move for that run happened today after that non farm payrolls miss. This could be a headwind for exports headed into the end of the year.
Energy was volatile this week with front month crude posting an almost $10 gain in 4 trading sessions on middle east tensions. It was the biggest weekly gain since March '23. Israel has vowed to retaliate and crude shipments are already starting to be rerouted away from their export facilities. Crude pulled back from today's highs when the Biden administration announced that he urged Israel to not strike Iran's oilfields in retaliation. Analysts are calling for a $10-20 spike in crude if a strike takes out 1m barrels per day.
- Chris Winward
Swift Trading Company
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On the date of publication, Chris Swift did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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