“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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5/15/2024

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Live Cattle:

The convergence of basis will help significantly were futures to continue to move towards cash.  With the top of the triangle at around the $182.00 level, that is not a far drop for cash in the south and about $5.00 in the north.  Of the most interest is that we are currently producing more beef than last year with fewer cattle.  Of everything you can mention that has created this, you are correct.  It's taken everything possible to have accomplished such a feat.  The increase in beef production has come from multiple sectors, with each adding just a little that makes up a percentage of the loss from beef cattle.  Helping this to transpire has been the methodical reduction in slaughter that created a two fold scenario.  On one hand, it gives cattle feeders time to grow cattle larger, as well as keeps limited beef supplies to the consumer, elevating the retail price to levels believed rationing beef to the consumer. The elevated price level goes a step further in encouraging imports and discouraging exports.  While you may call it most anything you like, I feel as if agenda to meet a goal is about as correct as I can think of.  

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Feeder Cattle:

The trading ranges are narrowing in the feeder cattle market.  Although a single days range can be huge, most of the trading over the past month has been within $9.00.  As time goes by, the triangle narrows as well.  As it won't surprise me to see cattle feeders bid up for inventory again, I don't expect them to.  The more I learn about the dairy/beef cross, some of the margin available from the start, and revenues generated from beef sales the same as from a beef cow, the difference in margin is staggering.  Cattle feeders are believed paying way too much for incoming inventory and in this stage of the game, with beef production stabilizing, it doesn't look good.  If you are relying on next year's cattle herd being even lower and that making a difference, by then, the agenda will be so set in stone, it will be more than difficult to break. Although the packers are very good at breaking the fat cattle market, cattle feeders have little success in breaking the feeder market.  That is because there remains tremendous feeding space for which is filled at present, but believe will dwindle going forward.  Less feeding space suggests that once full, prices would move lower to find a home.  The basis is going to converge.  Neither you, nor I, know which way, but we both know they will converge.  There remains $14.23 basis spread between the index and August.  If the premium of the August is met, cattle feeders will be paying historical prices for incoming inventory for which have not shown a profit of since September of last year. If not privy to beef sales or the volume of formula trade, it is unlikely traditional manners of feeding cattle will produce a profit. 

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Hogs:

Hogs were mixed.  Hogs are converging basis.  

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Corn:  

Today's rally faded as again, the delays from rain today, are of great benefit to everything already planted, or to be planted.  Beans sold off as well, and wheat couldn't withstand the pressure.  I think if you have an issue with feed costs, then continue to go hand to mouth as the premiums of futures and basis will have you paying way too much unless there is some stupendous rally.  I continue to expect grains to trade lower.  

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Energy:

Energies were lower prior to the release of the DOE report, but afterwards, have moved to new highs for the day at the close.  All three set new lows in this decline today, keeping the bear market alive.  The day in, day out volatility in energy trading will persist, but it appears the trend is lower. 

Bonds:

The CPI and retail sales data today was a little stronger as well, with a few cracks starting to show up. Nonetheless, it appears as our economy as a whole is in dire need of strength in leadership.  Excessive government spending is believed keeping wholesale and retail prices elevated to the consumer for which is believed being impacted greatly.  Bonds were sharply higher today.  

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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.