“Shootin’ The Bull”
End of Day Market Recap
by Christopher Swift
12/16/2024
Live Cattle:
Futures traders are believed to have tightened the screws on cattle feeders today. Today's rally in the feeders, and not fats, continues to shrink any margin available, or worsen one already in the red. Friday's on feed report is expected to show the same thing as it has the past 19 months, over 11 million head on feed. In my opinion alone, the lack of concern over beef prices and consumer demand leads me to believe that risk of loss is even more elevated.
Update on Head & Shoulders pattern in the cattle market.
Feeder Cattle:
There is an interesting aspect of this rally in feeder cattle. One, it was caused by a fundamental change in weather for which wheat pastures became available for grazing. This means that not one head less has been created by this flurry of activity. There is no loss of cattle here, just a movement of them further in time for which when they come back as heavy, in whatever weight category they are, there will be the same number, if not more than what has been traded since the flurry started. Two, it has raised the price of feeder cattle, for which are not the ideal weight size to go back on pastures, but they will come back to the market as excessively heavy feeder cattle. Cattle production continues to be more capital intensive. While this factor does not make the price go up or down, it does expose producers to greater financial risks, or their lender.
Hogs:
Hogs were mostly lower with the index down $.06 @ $83.84. I expect the lean hog index to decline to approximately $75.00.
Corn:
All three were lower today with beans making new contract lows. Corn is approaching a 50% retracement level for which I believe the ownership of long call options to be beneficial when turning variable costs into fixed costs. While some concern has surfaced over lower prices, corn is believed near intrinsic value. I would expect something to have to change significantly to see corn at new contract lows.
Energy:
Energy ended the day lower. All three put on rallies that kept them well off the lows for the day. I continue to expect energy to trade higher. With a lull coming up in the next two weeks of abbreviated trading, volatility could rise significantly. While it is low, and prices off last weeks high, I continue to recommend topping off farm tanks, booking some spring fuel needs, or buying call options on crude oil. This is a sales solicitation.
Bonds:
Bonds continue to push lower. If the Fed cuts, it will be viewed as further stimulus with banks benefiting the most. Their margin spread will increase as most retail rates are based upon the ten-year yield, currently at weekly highs, against the Fed window, lowering by at least a quarter. The US dollar is higher, believed resuming its up trend.
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.
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