“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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4/22/2024

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Live Cattle:

Short futures traders are believed to have been the biggest buyers today.  How open interest ends up on today's trade may help to decipher how interested traders are.  Seemingly, most forgot there was a week in March for which very little interstate commerce took place, therefore leaving a void in a weeks placement.  The January snow storm presented a like situation for which the month of February took care of by increasing the placement above expectations.  So, while I don't think April is going to increase by much, I think you will see the placements for April higher than some may guess.  Of some interest would be that there are few questioning the placement number in a manner that suggests, "why would they place more".  I am already seeing signs of slowing purchases that were trying to get in front of the curve.  Importers are believed filling needs and with more fed cattle on feed than last year, and whole lot more than many ever thought possible, there is no shortage of beef at the moment.  Yes, I heard you say, but what about the future?  Again, my belief is that alternative sources of beef through the dairy/beef cross, increased imports, decreased exports and maintaining a high price to the consumer in an attempt to slow consumption, will keep beef prices, and therefore cattle prices, from moving to new highs.  Maybe they do.  I have done this for long enough to never say never.  I expect prices to continue to gyrate within the boundaries being created in the form of a triangle.  This should provide opportunity again for cattle feeders to use any widening of a negative basis to help lock in prices that may or may not be traded in the cash markets. 

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Feeder Cattle:

Cattle feeders may have attempted to jump into the fire on the opening. Open interest trade today will help to tell the tale. Not much helped them though as feeder cattle were up more than fats and feed costs perked up a little today as well.  So, while no big changes yet, we'll have to see how cattle feeders feel about paying more money after prices have stabilized somewhat over the past couple of weeks.  Backgrounders will most likely be under the gun for several weeks as they will be bullish, the market may not be, and lenders will be pushing to hedge most any negative basis created.  Most contract months are hitting the 34 day moving average. This price remains several dollars from the top trendline.  The gap created today will have some questioning as to whether or when it will be filled.  I think it will take a day or two to see who is really willing to keep paying higher and who is not.  This report changed little of the aspects already known, with some inclinations of higher placement in April than first thought as some cattle are expected to bleed in from the March time frame.  Other than this, retail beef remains sky high, restaurants continue to increase menu prices and consumers appear to be spending money they don't have. 

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Hogs:

As hogs have finally broken their up trend, the wave count appears to be wave 1 or A down complete, wave 2 or B in progress, with further convergence of basis anticipated to take place with a wave 3 or C decline to meet the index level, currently at $91.35.  

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Corn:  

Grains and oilseeds rallied today. A lot of talk over the weekend about grain farmers not needing to sell grain.  Apparently, so much government money was made available, it has put the farmers into a cash position where they don't have to sell.  This will make things very interesting as this could be a battle to attrition. That being, does the farmer need to sell, or the commodity fund get out?  In my opinion alone, I think the farmer may have the upper hand for a short period of time.  That said, they can keep grain stored and meet a minimal storage fee, while the commodity fund has to post margins every day, and could be at a loss in the position for which they do not own the physical.  To you the farmer, it is exactly what you needed to help you market at a higher price.  If you did not like seeing December corn slip under $4.60 last week, you can do something about it.  Same for new crop beans.  Whatever you do, do not become complacent in thinking that grains will just continue to rally because you won't sell.  What will most likely happen is a push higher and a fast trip back down again.  Be prepared, and get ready to market some grain!

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Energy:

Energy is believed to have topped.  The middle-east situation is expected to soften and I continue to believe the first quarter bout of inflation was money spent the consumer didn't have. With the carry in diesel now moving towards normal carry, I expect both gasoline and crude oil to do the same.  The pop heard a couple of weeks ago in the equities market continues to leak.  Today's patching of the hole is not expected to last.  I anticipate that the change in carry in the diesel fuel market is a telling sign of a weakening market.  If so, a trade of July crude under $79.39 will set the stage for a quick drop to $68.00, testing the December '23 low.  I have to believe the first quarter bout of inflation caught many by surprise.  Well respected analysts were wrong on energy prices softening in the first quarter, but their fundamental analysis may have enough excuses for the rally, that were it to turn south, a simple "I told you so" could be sufficient.  Markets can remain irrational for much longer than one can remain solvent. 

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Bonds:

Bond traders tried to push bonds higher, but at least they had a tough time keeping them down on the day as well.  I continue to believe the bout of first quarter inflation is coming to an end.  Inflation remained high through the first quarter and into the second.  Of the most interest is that so many believed some deflation was due, that one has to wonder where the consumer improved economically to spend more.  I think it maybe as easy as seeing that those working are having a more difficult time, while government handouts are fueling the inflation.  So, no one gets ahead, and seemingly, consumers are spending money they don't have. 

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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.