“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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4/15/2024

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Live Cattle:

Today's price action suggests a good chance the bottom of the triangle has been found.  I recommend buying June live cattle with a sell stop to exit only at $170.20.   This is a sales solicitation.  I chose this month to be long due to the aspects of the January placements and potential short fall of market ready cattle at about the same time "beef eating season" kicks into high gear.  After that though, with increased placements in February, and maybe not as light in March, there will be ample inventory through the remainder of the summer.  The triangle continues to form while the industry grapples with where it is going. I expect a choppy return to the top that may produce 3 definitive wave sequences, than what has seemingly been straight up and straight back down again. Again, marking time until the industry can increase beef production, while keeping the consumer from eating up the breeding stock. Both of which can make for volatile pricing of cattle.    

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Feeder Cattle:

So, here is where it gets interesting.  Cattle feeders have an opportunity to lock in the positive basis with the April and May futures contracts.  Although not available in the August and out months, a much narrower basis has been formed for which if you think prices are going to go above the historical highs of the index, you are about a $6.00 premium to, and still $15.00 to $20.00 less than the previous 1st quarter high. A lot of change has taken place and now is no time to be slow.  The change in basis creates a new pricing scheme for which either buyer or seller can be privy to.  Still need to market some inventory in the summer and fall?  Then August futures is still $3.08 above the all time high of the index and currently $9.95 higher than today's index reading.  Do you need to buy feeder steers in August?  The August futures are $21.15 less than they were just 3 weeks ago.  Yes, still above the index and above the historical high of the index.  Long way around the barn, but you can see that for whatever your dilemma is on marketing or procuring, it is in not too bad of shape either way in comparison to just 3 weeks ago.  I continue to expect prices to trade within the contracting triangle.  I expect the up move this time to not be as abrupt with more sideways trading to allow for as much time to go by as possible.  The market remains in a discovery phase and may take out to the end of May before some definitive actions take place concerning expansion. Then again, expansion may never take place as it has in the past.  Articles abound of agricultural property sold to be placed in development.  Disbursement sales have been noted elevated this spring.  This is the older ones exiting at the top.  Lastly, the cost of money continues to rise as stubborn consumers continue to buy those pesky needed items, keeping the Fed from lowering rates. 

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Hogs:

Hogs were lower as convergence of basis is taking place. The 4 day event of wiping out over $8.50 of gains to slam the basis spread tighter is an example of the market remaining irrational for longer than one can remain solvent.  

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Corn:  

Do something to increase your sales status on corn and beans.  This is a sales solicitation.  Regardless if you are bullish or bearish, the past several weeks of mundane, sideways trading has lowered volatility premiums to levels for which action can be taken with known outcomes. It all boils down to whether or not you can live with your marketing decisions.  I believe we can help you make some of those difficult decisions with the knowledge of your outcome before you ever place an order.  It's just whether or not you can live with the consequences of your actions.  Lastly, if you continue to sit on old crop, sell call options against them to at least collect a little premium and maybe even spur some upward price action to make you nervous about being short options.  This is a sales solicitation. What will that really do?  Make you make some sales were the call option to become in jeopardy of being exceeded. I expect a great deal more of sideways trading than higher.  

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Energy:

Energy sold off today.  However, crude did get back plus on the day and closed closer to the high than low.  I expect energy to continue higher.   The uptrend is well intact and no shortage of saber rattling going on in the middle-east.  Then, to throw insult on to injury, our very own administration is believed inept to do anything at all about it.  Expect more of the same.

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Bonds:

Bonds sold off again as the March retail sales were higher.  The Fed seemingly can't throw enough water on a fire that is being fueled with atomic energy in the form of government payouts, forgiveness, and subsidies of everything to everyone.  The over run of the border is another expensive ordeal, but much worse the dilution of society.   Oh, and the "pop" I believe I heard two weeks ago of the equities market is starting to leak a lot more now.  

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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.