“Shootin’ The Bull”
End of Day Market Recap
by Christopher Swift
12/9/2024
Live Cattle:
Although the seasonal tendency for October live cattle is firm going into expiration, it does not always suggest a new contract high. Of the last 17 years, 5 made a new contract high into October. With October of '25 having made new contract highs on the 3rd of this month, it is possible to be seeing the contract high for that contract year. I say that due to a lot of this fall's issues with wheat and them having gone on wheat a little later than normal. Since this falls issues with wheat pastures didn't remove any animals, but simply disbursed them along a longer time frame this spring, there may actually be a heavier concentration of ready feeder cattle this spring and early summer for fall placements. No, they most likely won't be as large in numbers, but not void either like some think. I urge you to consider this as we get a better idea on what will be available this spring, that might not have been, had placements continued heavier this fall, as in October.
The division continues as most I speak with are in awe of the risks some are assuming to remain in the cattle business. Those starkly bullish the market appear to have no need for risk management, so they don't call as often. I fully understand the flip side is that cattle numbers are down and a greater portion of cattlemen wish to remain in business. Therefore, either everyone gets a few at elevated prices, or a few get a lot at more at higher prices. As this is a market, and subject to adversities to price from multiple sources, I recommend you treat it as such with the knowledge that markets go up and down, and tend to remain irrational for longer than one can remain solvent.
Feeder Cattle:
With today's new high of the feeder cattle index, the desire to own a steer has reached new heights. The proud owners of historically priced inventory have to be elated. Now, all they have to do is put pounds on those animals over the next 3 to 8 months and hope the input costs and sale return their investments on an average of $2,229.12 for an 850# steer to start off with. There is little I can interject as we are in the midst of detailing, who wants to own cattle and how bad. I don't know what financial position one is in, to either afford investments, where return appears sketchy, or has to, in order to continue to be in business. I do think we are near finding out right now. My stance remains the same to keep a price floor under all inventory unhedged.
An interesting note I saw in a business this weekend, "fish where the fish are". That sounds so simple it appears genius. If there are only a few fish left, as many are telling me, then it might be time to go fish somewhere else. Similar to, there are a lot of people that want to play musical chairs with fewer chairs to go around. As you try to find your place in this shifting industry, know that futures and or options are not going to be your saving grace. Paying too much for something starts the venture off on a bad foot to begin with. At this point, with a positive basis, were futures to dip a little lower, the best some could be hedging for is a breakeven. If, and only if, the price continues to rise is some of this newly purchased inventory going to profit, while the downside appears laden with obstacles to overcome.
Hogs:
Hogs were lower today. The lean hog index was down $.20 at $83.73. I expect hogs to move lower. I have no idea why commodity funds have such a long position in hogs. Futures have gone up significantly while the index went up modestly, and most recently been trading lower. With this advent of the basis over $18.00 negative to the three summer months, I continue to recommend producers, not under contract, to use the options in hog futures to produce marketing parameters for summer sales. This is a sales solicitation.
Corn:
Corn ended a tad higher. July is back to the top of the triangle. A push higher of a nickel or more and it will appear as if corn is breaking out to the upside. If you bought corn today, and placed it on storage until July, you would pay approximately $.42 or $.07 per month for storage fees. At today's price of December at $4.33&1/2, you will have paid $4.75&1/2 when you pick it up in July. The July contract is trading at $4.50 or $.25 lower than what you will be paying storage for on cheaper corn today. Therefore, to keep with attempting to turn variable costs into fixed costs, you can fix your corn feed needs out to July cheaper than you can buy and store. As well, if you use that $.25 you are not paying in storage, then consider buying the $4.50 July corn call and selling the July $4.00 corn put and now you are fixed on where you will be buying corn in July of '25. Where, did you ask? You will either be buying corn for $4.00 plus the premium (regardless of how low it goes), somewhere between the two strikes plus the premium, or regardless of how high, you will own corn at strike plus premium. This is a fully marginable position with unlimited risk below the short put strike price and unlimited reward above the long call strike price.
Energy:
Energy was higher to start the week. Last weeks low remained in a contracting pattern. A trade above $71.80 will still be a point to break before I would expect much higher. The lows last week pushed diesel fuel to between $2.17 and $2.15 in the spring months. As in corn, fixing some of your variable costs may or may not help to average costs higher or lower than at present. Fixing your energy needs is believed as crucial as feed or the cattle. So, I recommend topping off farm tanks, forward contracting spring fuel needs, or buying call options in the crude oil futures. This is a sales solicitation.
Bonds:
Bonds and notes were lower on the day. The US dollar is believed going to resume its up trend. Gold was sharply higher, but with expectations of lowering inflation, gold may have run its course for awhile.
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.
/Apple%20logo%20on%20store%20front%20by%20frantic00%20via%20iStock.jpg)