“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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5/1/2024

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Live Cattle:

Inflation has remained higher for longer than anyone predicted.  Especially the Fed.  Their once transitory inflation has spun completely out of control.  Attempts to reel in consumer spending has been met head on with increased government spending. Hence where we stand today in stagflation. With beef production now plus on the year, historically high cattle prices don't make near as much sense as they may have to some just a few months ago.  Futures traders have been quick to take price off futures, leaving a significant positive basis to contend with going into the grilling season.  I have heard that some are getting caught up on grinding purchases and that is causing prices to soften.  Earlier this week, we saw McDonalds post weak earning's with expectations of them remaining weak.  Today, the headlines were from Yum brands and Kraft/Heinz stating slowing consumer purchases and traffic.  Last week, most missed the GDP report by a mile and today, the Fed has stated they will keep rates higher for longer until a definitive move towards the 2% goal is achieved.  So, the higher rates are here to stay for a little longer, but look for the bonds to trade higher in expectation of the stagflation creating a weaker economy.    

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Feeder Cattle:

Feeder cattle were sharply lower because the agenda is working to produce more beef with what is available.  Whether imported, not exported, weight gain per beef steer or increased numbers from the dairy/beef cross, the industry has found a way.  This leads me to think that not as many cattle are going to be needed if we can produce more beef per cow and import more.  Of course I know you don't want the imports, but the consumer doesn't want high beef prices.  Note how quickly the Paraguay issue fell silent.  Who has the greater voice? the few cattlemen that balked at their senator about the issue, or the thousands of voters who are fed up with high prices.  No pun intended.  I continue to believe prices will fluctuate within the already established triangle.  If they begin slipping lower, it is possible a major C wave will be starting to form that would be anticipated to equal or exceed the lows made 12/23 at under $220.00 via the feeder cattle index.  A great deal of money has been spent on ownership of cattle.  They have to go higher in price for you to profit.  The current economic environment is believed adverse towards growth, with a propensity to soften. 

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Hogs:

At first, the basis diverged sharply, but by days end, the natural convergence of basis won out.  In my opinion alone, the computers can influence the markets, but can't dictate them.  

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Corn:  

Traders are believed to have slowed selling in an attempt to move prices higher, so they can sell into them again.  The speed in which planting is taking place, and the great weather is expected to produce a bumper crop.  Stored grain costs money to store and price moving lower decreases value of the grain stored.  Marketing the grain and placing the money on deposit to earn a return, or paying off debt, is believed a much better way to use the resources of the stored grain. Especially, since the Fed isn't going to lower rates anytime soon, as they stated today. So, put pencil to paper and see how much the price of stored grain will have to move higher to pay for storage owed, or kept to a specific date, in comparison to selling and placing the money on deposit, or not having to pay interest on debt. This should not be too difficult to assess.  I expect grains to trade sharply lower with a November bean target down to $10.22 and December corn to $3.92$3/4.      

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Energy:

Energy was exceptionally volatile today with an enormous price range.  Crude is believed to have broken the back of the 4 month rally.  Diesel fuel has resumed its down trend and gasoline is believed to have topped last week.  The plummeting diesel fuel is a bad sign and with economic numbers already reflecting such, and the Fed not going to help, further declines in energy prices are expected.  I think this administration will win a shallow victory by saying they have brought down energy prices. In actuality, I agree, as they seem to be bringing down the US economy along with it. 

Bonds:

Potentially as the Japanese currency debacle begins to subside, the bonds may see some relief from the selling.  Economic data has pointed towards a need to see lower rates and today's action by the Fed is expected to increase those needs to lower rates.  The stagflation is here for the summer as this administration will continue to sustain or increase government spending that will conflict with the Fed's goals of attempting to quell inflation.  Until one or the other stops, the stagflation continues. 

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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.