“Shootin’ The Bull”
End of Day Market Recap
by Christopher Swift
11/14/2024
Live Cattle:
Fats were lower. There is ample beef production out to February and beyond if October on feed breeches 12 million. There is a worry that there is nothing coming behind them. I think the industry is in a transitioning period for which when complete, there won't be a need for as many cattle as we have had. I would look more towards sustaining what we have, over producers expanding, or rebuilding. The trend is well established of producing more beef from fewer cattle, as well as increased imports and decreased exports. Therefore, until these trends are broken, one should not expect a surge in heifer retention or a decrease of imports. All else hinges on demand for which the new administration appears anxious to get prices down. So far, the over 6.5% rise of the US dollar in 6 weeks, and rates sharply higher in the same time frame, appears as if they have a good head start in making buying new things on credit more expensive and discouraging exports with the currency exchange rate.
Feeder Cattle:
Like the fats, feeders were soft. No favors were given today to cattle feeders. Lower fat cattle and not as low feeder cattle makes the margins shrink to cattle feeders. I believe we are on the threshold of a significant move, whether higher or lower, but I don't expect prices to remain here for much longer. The January contract has produced an $8.00 range from the breakout low on 10/2 to the top on 10/14. Since then, the range has been traversed several times with today's close just about dead center of the range. So, $4.00 higher or lower to exceed the current range and by that time, there is no telling what will have transpired to make cattle feeders more bullish or bearish. Backgrounders are believed being pinched as well with margins narrowing sharply over the past two weeks of higher calf and stocker prices and no higher feeder cattle prices in the future to lay off risk at a premium.
The market is thin of human participation. The volatility, due to lack of bid/offers at more price levels, is wreaking havoc on producers attempting to lay off risk. As novice as this may sound, or wrong as it may be, by watching it every day, mostly by the minute, and participating in the market to quite an extent, I get the feeling that most producers are more worried over losing than attempting to capture something not available to them. Hence, once a human makes a decision to sell the market, or buy puts or whatever, they are pretty much done for the day. Funds, and speculators that have computer generated programs are believed to have the speed of computer generated buy/sell programs, but also are either not trading their own money, or have AI generated trades with higher probabilities than most humans can think. Lastly, there is a lot of money being burned up in this sideways trading range. I recommend you position yourself in a manner for which you can live with the consequences of your decisions. Again, I do not expect prices to remain in this range for much longer, regardless of next direction.
Hogs:
Hogs were sharply lower. I made the recommendation on the mid-day cattle comment to buy the April $88.00 puts. This is a sales solicitation. There is a Moore Research seasonality that suggests April declines from about the middle of November to middle of December.
Corn:
All lower again today. There are no surprises here with the lower trade.
Energy:
A lot of volatility, but little was gained or lost today. Friday's close will be important to my analysis with a weekly close above $69.49 keeping the pattern intact, and a close above $70.38 as keeping the analysis moving forward.
Bonds:
Bonds are a little higher. The PPI was a little softer than the CPI. So, consumers felt more inflation than did producers in October. I do not know what bonds are most likely to do at the moment. To add a little spice to the soup, I can't find a market more inflated than the equities. Note the monthly chart below and the gains from the '09 low with stimulation became the main driving force of the US economy through interest rate twists, quantitative easing, buy back programs, and most recently the 3.5 trillion dollar hand out combined with billions of forgiven loans. Note the last 3 years seems like the blow off of the previous 11 years of stimulation. Currently, interest rates are perceived as beneficial for a depository return on investment, while equities appear at levels for which if profits were taken, they would be captured, and out of risk of harms way of the new administrations agenda to lower inflation. Something to sleep on overnight.
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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