“Shootin’ The Bull”
End of Day Market Recap
by Christopher Swift
10/11/2024
Live Cattle:
In my opinion, not enough transpired this week to form an idea on what the next most probable move will be. With basis even, cash is dictating direction. Albeit slow, prices have been firming. Just about everything I use to formulate an idea has led me to continue to recommend owning the at the money puts on live cattle for inventory to be marketed. This is a sales solicitation. I have no doubts that prices can go higher, but in order to do so, one is going to have to invest a near historical level of working capital and that is where I am unsure that the profit objective is worth the risk. I think with the most recent rise in price, it continues to cut the losses of traditional marketing's of on the hoof, but even formula cattle, or those privies to beef sales, have seen stagnation in profits, if not some lower. As the resilience of the consumer continues to be discussed, this week, and most of last, energy prices are higher, with the impact now being felt at the retail pump. With new expectations of higher energy prices, one has to consider this will be a direct impact on discretionary spending. In the feeder cattle market, it has been the futures trader as the standout. Once willing to offer scads of premium, to producing steep discounts, they have put on a rally strong enough to converge basis. On top of that, producers have benefitted from further advancement in the feeder cattle index. Albeit small, they are still advances. Note that the price level of the CME index is nearing a 50% retracement level, and forming what is believed the right shoulder of a "Head & Shoulders" pattern. As the index is currently within $12.36 of all-time high, that is only 5% from the top, consider where prices have been, where they are, where they can go, and take action accordingly. I think it will take a whole lot of good economic news and shift to a more aggressive spending pattern than at present to justify much higher beef or cattle prices.
Corn and beans are expected to form a significant sideways trading range to mark time in while the US wraps up harvest and SA gets it in the ground. Wheat is believed to be trading higher on mid-west drought and world tensions of grain shipments through the Black Sea corridors. The world tensions are believed a part of what shocked energy prices higher last week and still following through this week. I had a change of analysis on the crude oil. Seemingly the weaker US energy policies, combined with middle-east unrest is keeping energy prices firm. Technical indicators and the wave count leads me to anticipate a higher trade. I recommend this week for producers to do something to help curb the potential for a rising energy price. We have the tools to do such when interested. Rates were higher all week long with bonds continuing to move lower. The stimulation China recently produced and the US rate cut appears to be waning now and actually did what they wanted. That being, perked up prices for a little while. For the time being, inflation is still moving forward. Equities posting new highs today is about as clear a picture of inflation that I can see. I anticipate a great deal more of volatility than I do price direction.
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.
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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