“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

​11/11/2024

Live Cattle:​ 

​This is the way I see it and not to be confused with fact.  The US dollar was moving sharply higher and bonds sharply lower beginning in October of this year. When Trump won, those two markets did not reverse, but accelerated in the same direction.  Hence a belief this is the direction these markets want to go.  A strong US dollar encourages imports while discouraging exports.  Higher interest rates makes everything more expensive when borrowing money.  As well, the higher rates offers an alternative investment for which other markets may look exceptionally inflated. Grains and oilseeds are believed beginning to trade lower due to these developing trends of bonds and the US dollar.  Bring in meat to the equation and we have seen all year exports decline and imports increase.  This will be expected to continue with the trends in place.  That leaves Monday and today's rally very interesting in that if this analysis is in reality bearish meats, long positions have seemingly pushing prices higher, and exiting at the same time with a two day loss of open interest over 7,000 contracts. I think it possible that funds have, or are managing getting out of their long positions.  Beef and cattle will seemingly be a stand alone commodity if these markets are able to trade counter to the seemingly bearish fundamentals.  I don't think they can.  Tyson's earnings report reflected a larger volume of trade in beef, but a loss on it.  Hence, they had to do a lot more work and still lost money.  If Trumps plans are to lower inflation, the markets remaining at the top are equities, cattle, feeder cattle, and hogs.  No other market is at or near a previous high.  Equities remain the most inflated of all markets.  Imagine if that balloon pops?  Long way around the barn, but this analysis, whether correct or not, leads me to not only remain short, but continue to recommend producers shift as much price risk as possible to someone else, besides yourself. 

​

Feeder Cattle:​

Futures markets are designed to transfer risk from one party to the other.  The current party owning cattle continues to pay top dollar with what appears to be changing fundamentals.  If you wish to transfer some of the risk you are assuming, we can help you do that.  You will need one thing, the ability to live with the consequences of your decisions.  If you do decide to transfer risk, do so at the money.  Don't let any profit potential from the downside escape under the pretense of just a breakeven floor.  You need to keep making as much money as possible as cattle prices have pretty much stopped going up.  The small gyrations of the index are clues that cattle feeders are believed waiting for the next shoe to drop.  If consumers are willing to spend more, employment increases, or wages,  I could see beef prices rising again.  If consumers are as impacted by the inflation as have commented recently, with only the "rate" of inflation lower, it may be difficult to find the consumer willing to spend more just yet. Like the fats, futures traders did producers a solid today by shoring up the basis a little bit more.  Long futures traders have a good basis to work with, if it narrows with futures moving higher.  When, or if, the index begins to slip, a trade under $249.09 will lead me to believe a reversal is forming. ​​​

​

​Hogs:

​Hogs were higher with the funds not ready to capitulate yet.  The index has though and I expect it to be under $90.00 before weeks end.  ​

​​​​​​​​​​

Corn:  

​Corn, beans, and wheat are susceptible to the rising US dollar and higher interest rates.  Especially the US dollar. All have seemingly produced a significant rally with weather in the wheat belt significantly more favorable and South American weather as well.  On the mid day cattle comment, I made the recommendation to wrap up any bean and corn sales that are going to be marketed in this year.  Although the spread to roll into July corn is more favorable, I am not so sure I want to be long grains at the moment.   

​

Energy:

​Energy traded lower again today, but was able to recoup to plus at the close.  Although I do expect all commodities to be impacted by what appears to be an agenda of higher dollar and lower bonds to help curb the inflation, there could be outliers that may trade counter to the main trend.  I think energy is one of those due to its world production.  This leads me to continue to recommend topping off farm tanks, booking some fuel, forward contracting fuel, or buying call options on crude oil.  This is a sales solicitation.  ​​

​​​

Bonds:

​Bonds are lower.  I have to believe that the extent of the decline and rise of interest rates, within a 6 month time frame, has thrown a great deal of institutional trading upside down.  Not only that, bonds and notes moving lower makes retail rates higher and the Fed's cut makes borrowing from the bank lower, hence widening the profit margins to banks. ​​​​​​​​​​​

​

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.