“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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4/18/2024

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Live Cattle:

Changes are taking place and you have to take note of them.  The most important to me is the building of carry in the diesel fuel market.  Diesel is the energy source of commerce.  Manufacturing and transportation are run with diesel fuel.  Gasoline is the energy source for the consumer and has led the way of products.  With diesel now in a carry market, with expectations to go to near full, it leads me to believe there is significant trouble brewing.  The loss of diesel demand, and now potentially gasoline, leads me to believe the rate hikes, and 1st quarter bout of inflation have taken its toll on spending.  This change leads me to expect the inflationary statistics to begin coming down on our next CPI, PPI, and retail sales reports.  If so, it may lead to further shifts in consumer discretionary spending.  Please note this as you are expecting or needing the consumer to increase willingness to spend or increase consumption.  The above suggests just the opposite. 

 

Fats were mostly higher.  Even with the above stated, a quick trip to the 34 day moving average, or down trendline of the triangle is not out of the question.  I think were the above to begin to be more recognized, it would add probability towards continual triangulation of prices, or maybe another leg down.  All of the upside focus on cattle has been supply.  However worse it may get in the future, today, all of the higher priced cattle is in regards to a 3.2% decline year over year in beef production.  Couple that with imports and it will look as if there is no shortage of beef at all.  I am becoming skeptical of my analysis towards a higher price. 

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Feeder Cattle:

There is not a lot to add here as the above will cover feeder cattle as well.  Something to consider in your marketing plan is where prices are.  That being, to the historical high of the feeder cattle index, it is down 4.5% from its high.  This will be very close in line with April and May futures.  August through November feeders are trading at, or slightly above the all time high of the feeder cattle index.  So, when considering your marketing, prices remain at, or very near, the tip top.  What most are looking at is the what they could have done if proactive in marketing.  That being, marketing product nearly $20.00 higher than today, with aspects of potentially $30.00 higher.  With those aspects gone now, you are having to market at cash today with only a small premium in the fall months.  Still, these are stupendous prices.  Whether they are profitable though is a different question as many were relying solely on price moving higher to create their profit margin.  

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Futures were higher with expectations to move to at least the 34 day moving average with the potential to reach the down trendline of the triangle. 

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Hogs:

Summer hogs are going into convergence. It will be testy with the wide price range and hyper volatility.  

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Corn:  

Did the grains wave good bye today?  Farmers are believed in need to market some inventory and turn a deteriorating asset into cash to pay off debt, buy necessities, or place on deposit for a predetermined return.  Corn and beans made new lows today.  How much lower will you allow them to trade before taking action?  Although not nearly as advantageous as they were when first recommended, there are strategies that will produce marketing parameters for which can produce leeway to a higher or lower priced market.  Lastly, if correct on the energy markets, corn and soy oil will lose a great deal of the support the energy market produces.    

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Energy:

Energy plummeted, rallied sharply, and then moved in their separate ways. Crude tried to stay plus, gasoline was a little lower and diesel fuel was lower.  The big turn of events is the diesel fuel market now in carry.  An inverted carry charge reflects demand as those in need are willing to pay the higher price today to secure the product.  A carry charge market reflects less demand on the front end and encourages storage by offering a higher price if you will keep it for them until they need it. With this change, it leads me to expect both crude and gasoline following suit.  Demand for diesel had been questionable to begin with.  Gasoline, the energy source of the consumer had been moving higher, reflecting the 1st quarter inflation seen in the economic reports. My opinion alone is that the consumer has spent money they didn't have in the 1st quarter and will be cutting back in the second and third. A decline in gasoline prices and changes in carry will help to add credibility to the analysis. Pay attention to this, even if you don't understand it, this factor is very important.    

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Bonds:

Bonds were lower with absolutely no desire to push higher today.  I am unsure why the lethargic trade as both energy and equity prices have produced significant price expanse today.  Regardless, until bonds make a new low, I am going to continue to be friendly with expectations of movement higher in bonds that will reflect a slowing economy.  Note that nothing any more moves very slow.  If the economy is slowing, traders will move quickly to avoid adverse price fluctuation and potentially cause significant volatility.  I believe a lot of what has been transpiring with this administration is coming to a head.  The overwhelming costs of pandering to illegal immigrants will have ramifications significantly greater than already are. Whether it causes further collapse of society, or produces another round of increased spending, (printing money) the debt the US is in and administration at the helm, leads me to be overly cautious for a robust economic or social outcome.   

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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.