“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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5/21/2024

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Live Cattle:

Traders stopped June at the top of the down trend line, via the close only chart.  The bar chart only has a few more cents from today's high to put the price at the top trend line.  With cash quite a bit higher, I don't want to say this has to hold as it most likely may not.  Regardless, traders have put about $8.00 on June in the past 5 days.  I still see very little to do in the fats, due to a great need to get every penny out of them.  Consumers have been noted shifting in discretionary spending.  Everyone has a concern of losing the consumers business, but at the moment, it appears the consumer shift from cuts to the grind may keep production and prices status quo through the summer.  August is about $2.00 from reaching the down trend line and October about the same.  With feeder cattle remaining well within the triangle and fats attempting to break out of, it leads me to expect some changes in how cattle feeders approach buying incoming inventory.

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Feeder Cattle:

When May expires this week, the August contract will set a new historical high, via the weekly continuation chart. The next step will then be to see if humans pay a higher price for the physical inventory. Although basis remains somewhat wide, it is the starting spread between feeders and fats that continues to reflect poor odds of success.  At today's close of $259.72 August, when applying 550 pounds, at $1.00 cost of gain, it leads to a animal worth $2,757.62.  At a 1,400 pound slaughter weight, it will take a $197.00 fat to return the input costs.  To date, the historical high of fats is $190.27 made in March of this year.  It tends to be a rare feat for the June contract to exceed the highs made by the April contract month. Not to say it won't, but it rarely does.  Cattle feeders are expected to go back deep in the red once past June.  That is because feeder cattle prices rose rapidly and far in price in the first quarter.  It was $47.00.  So, with each month going forward from next week, the profit margin will narrow dramatically without further advancement of the fat market, or an extreme change in feed costs.  Neither of which is assured.  Of some interest to me is the previous analysis where I believed the next most probable move to be a significant triangle in which time will be marked in order to allow for the agenda to begin to work.  I sometimes amaze my self as when viewing the 50% mark of May feeder cattle of the September - December of '23 decline, it is within $.48 of Monday's index reading.  That is about as close to the middle of a $59.00 price range you can get.  I expect August, September, and maybe even October to do the same.  If it were to do that now, it may suggest the index moving higher.  Were futures to retest, or exceed the bottom of the triangle, it may come much closer to where the index is now, than $10.00 higher.   Just remember, when paying top dollar, you have to find someone else to pay an even higher top dollar.  

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Hogs:

Hogs were lower. Convergence is taking place.  However unbelievably volatile it has been, they will converge.  

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Corn:  

Corn and beans lower with wheat higher.  On the mid day cattle comment, I urged again for farmers to fix some marketing parameters around this years needs.  Complacency appears to be settling in with farmers believed thinking they don't need to market grain and nowhere out there is a huge increase in demand for.  Sideways trading may persist for a little while longer, but I think after this weekend, the seasonal tendency will be for a weaker trade in row crops. 

Energy:

Energy was lower today and believed resuming its down trend.  I expect energy to trade sharply lower.  

Bonds:

Bonds were firmer, but nothing to write home about.  I expect bonds to continue to move higher as the government spending appears to be putting hardships on consumers not privy to the government spending.  

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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.