Shootin' The Bull
"Shootin' The Bull" is a daily futures and commodity market commentary, written by Chris Swift, commodities broker and founder of Swift Trading Company in Nashville, Tennessee.
With over 30 years of experience in the commodity futures industry, Chris's technical and fundamental analysis is provided for his clients and readers in an attempt to make a more informed trading decision.
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“Shootin’ The Bull”
End of Day Market Recap
by Christopher Swift
Traders clamored and clawed all day attempting to close the gap on the October contract. August tried for a new contract high and the rest of the months appeared to regain what was lost on Monday. Although packer margins remain in the black, they are losing those margins quickly by paying more for cattle and boxes believed in a down trend. The higher trade today doesn't lead me to want to do anything. Hedging opportunities are always available, but seemingly at this time, not very beneficial. I don't foresee the consumer changing much in discretionary spending. All in all, there appears very little to anticipate in the fat cattle market.
The rally in feeders, from contract low, is littered with overlapping waves. The new highs are being made on lower oscillator reading's. Whether or not futures traders will push prices to new contract highs or not, the current price is second only to contract high, with November at a new contract high. Spring months have consistently been in a bull market from inception of the contract. My concern lies with the remainder of this years cattle to market. Therefore, with the rally today pushing prices to the second highest for the year, I recommend laying off some risk if you have not done so already. This is a sales solicitation. Other than this, I don't see much else to do. I am getting the feeling that cattle producers are becoming emboldened. As in, "I can't lose". Two things that strike me the most about this time versus the 2012 - 2014 time frame. That being, the drought liquidation did not push cattle prices lower as it did in 2012 & 2013. Another is that expansion has not begun, or can begin for sometime to come. Therefore, there has not been any holding back of heifers or cows to the best of my knowledge. So, what this environment looks like from my view point is that participants have a taste of the current situation from a past experience. However, they have seemingly acted or reacted very early in consideration of what is anticipated. What one has to consider going forward is that from the May of this year low, producers have been adding to inventory at higher and higher prices. They have done so under a belief that a 2014 time frame is coming for which they will make a huge return on capital invested. When combining the two aspects of "I can't lose" and increasing inventory and working capital to sustain them, it worries me. You might want to consider all of the above and take the necessary precautions.
Hogs were sharply lower today. The index was down $.22 at $121.71.
I believe at this time, the selling is most likely not farmer selling. I think it remains more speculative buying that just doesn't push the market high enough to spur anything and they exit. Although beans may continue to benefit from rain, the corn will not. As well, were it to start raining now, mold, mildew and rot will set in. Next, if not dried in the field, there won't be much dried at the elevator with Natural and Propane gas setting a 14 year high and Europe at 5 times higher. December closed today on the support of the 34 day moving average. I continue to recommend securing your corn needs on down turns with call options. This is a sales solicitation. Bean meal continues to look as if it is in a bull market. I recommend buying needs in soymeal now. This is a sales solicitation. August went off the board at $520.00. September is at $436.60. If your needs are on the front end, I recommend you get busy today. If they are in the future, the December is discount to September at $396.80. Yes, I do understand that meal is already high. I can't help that and it does not discourage the analysis.
Energy prices were mixed today. Crude and gasoline soft, while diesel fuel and natural gas higher. Today posted a 14 year high on the natural gas. Interesting how crude traders keep probing the bottom, while the products hold their own, with diesel advancing. I think that bottom probing is going to lead to a sharp jab to the upside. Similar to a saying heard this week of " don't listen to what China says, watch what they do". In relation to energy, I hear a lot of talk on recession and consumers pulling back. I don't see that at all when passing Cadillac SUV's lined up at the gas pump. At present, I continue to anticipate higher energy prices.
Bonds were lower today, but clawed back from over a point loss this morning. The US dollar was mixed against the majors. I think trading is stuck in the summer doldrums with traders still on vacation, or still not knowing what to do next.