“Shootin’ The Bull”
End of Day Market Recap
by Christopher Swift
10/31/2024
Live Cattle:
A tale of two cities today. Spot October went off the board $1.67 from contract high and $19.23 higher from the 9/9 low, while back months traded lower. This is volatility, not only within the contract months, but within the sector as well. Open interest continues to grow, even with the lower trading. At today's close, most new longs from 9/21 remain upside down. Whatever need there was to push fats $12.00 higher in October and boxes $25.00 higher, that need may have been fulfilled now. Boxes were back under $320.00 at mid day. Friday starts some abbreviations to November and December. I will be watching closely to see if marketing volumes of stockers and feeders increases the next few weeks, or trails a more normal seasonality of lower volume. Regardless of anything, every weight class of cattle is elevated in price, within a small percentage of historical highs and what appears as an agenda that thwarted a reduction in beef production.
Feeder Cattle:
Cattle feeders appeared in no hurry at all to take advantage of the discounts of futures. Instead, it appeared more like additional selling was done. Open interest has begun to increase in feeders as well. With the start coming from the high on Tuesday of this week, I would dare to say more producers are interested in protecting what is available than anticipating more to be given. Going forward, I will anticipate the basis to become more difficult to widen out to extents we saw throughout 2024. Negative by $25.00 to positive by $20.00 and back to even within a 12 month time frame, when cash moved less than half of that, now that is huge volatility and price expanse. Whether cattle feeders bid higher or lower, every weight class of cattle is elevated in price, within a small percentage of historical highs, and what appears as an agenda that thwarted a reduction in beef production. I believe a great deal of gains have been made over the past four years due to higher cattle prices and copious subsidy payments. Regardless of the cattle cycle, the next few months will play havoc on markets as either more of the same takes place, or a 180 degree turn in government spending. Therefore, I recommend you do things to keep as much of the gains you've made as possible, allowing for opportunities to be taken in the future. With the contentions around this election, regardless of winner, volatility in most markets will be expected to be violent.
The feeder cattle index made a new high today. I have accounted for this and has helped to make a cleaner 5 wave count. While I would expect futures to try to fill some of this recently created positive basis, it will be more than interesting to see by how much. Note the changes on today's chart below of the index.
Hogs:
Hogs were mixed with the index up $1.05 at $86.78.
Corn:
Corn and beans were a little higher. Wheat was a little lower. With the poor crop ratings for wheat, and now rain, I do not know what to do, so I am doing nothing in the wheat.
Energy:
Not so in energy. Energy prices were sharply higher again today with crude oil filling the gap and charging back towards last Friday's high. I expect energy to continue to trade higher as the middle-east is embroiled with violence and hate. Diesel fuel has already closed higher than last Friday. I recommend you top off farm tanks, book some fuel, forward contract some fuel, or buy call options on the crude oil. This is a sales solicitation. For reference, crude is a 1,000 barrel contract with a 42 gallon barrel. Options expire approximately 1 month to the underlying futures contract. So, if you are looking to book fuel in March or April, use the April for March delivery and April for May delivery. An at the money option will trade at a 50% delta to the underlying futures contract. I continue to believe turning variable costs into fixed will serve you well into next year's production.
Bonds:
Bonds were lower, but able to trade plus for a minute or today this afternoon. Bonds look sick with not even a remote hint of a flight to quality with equities down sharply. I anticipate a great deal of position squaring, window dressing, getting out of Dodge, and shutting all the gates will take place up to Wednesday of next week. Buckle up or cinch your saddle, but do something to keep from getting thrown out or off.
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.