“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

​11/20/2024

Live Cattle:​ 

​Well, it appears at the close today that both longs and shorts, and those wanting to be long or short, of those not wanting to be long or short, were collectively holding their breath for the next shoe to drop.  Trading dried up to pretty much nothing by the close with February and April futures continuing to produce a negative basis.  How cattle/cattlemen deal with the incoming administrations 180 degree reversal of give outs to reigning in government spending, is unknown at the moment.   What I see in my minds eye is that there are those conducting business in a so called wholesale world, where vertical integration attempts to not pay retail anything, and those outside of, paying retail prices for inventory, like sale barn cattle.  As the auctioneer cries his chant, the high price secured by the seller is a top price you just paid and will have to market in the future.  Hence why I think it important that while there are some placing cattle within $8.00 to $10.00 from historical high, you should be making sure a floor is underneath these really expensive cattle.  Again, I believe a large transfer of risk is taking place, or should be, due to the agenda of the incoming administration's attempts to reverse the previous administrations handouts.   ​

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Feeder Cattle:​

​A great deal of money is being swapped around.  Margins are being squeezed between sectors with near historical prices again being paid for incoming inventory.  Margin calls on short futures or options spreads are impacting producers as well.  All that has to happen now is that cattlemen continue to buy cattle at higher and higher prices, so you can profit from just having paid a near historic price, and the incoming administrations agenda have no impact on the consumers demand for beef. I don't know that much more needs to be stated due to those who are bullish are most likely going to remain bullish and those who manage risk are going to continue to manage risk.  Neither makes the price go up or down, it will simply be as to how much of the newly acquired risk you wish to assume alone, versus how much you wish someone else to assume, and can you live with the consequences of either. 

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Of the multiple commodities traded, there are 7 that have made a new high, or remain above the 2022 or 2023 highs in 2024.  Those are, cocoa, coffee, gold, silver, cattle, feeder cattle, and equity indices. Gold, silver, and equities are believed a direct impact of the inflation and government spending through the Biden administration.  Cocoa, cattle and feeder cattle continue to suffer from lower production than in years past.  Coffee, I am unsure of why it rallied so much.  With the agenda of the cattle market, beef production has been equaled to last year with expectations of  2025 being equal to 2024.  Expansion, the holding back of heifers, is what bulls are banking on to propel prices to unknow levels.  The cattle/beef industry has made leaps and bounds strides to keep beef demand from crumbling with the higher prices to the consumer.  Were the administrations agenda to begin working, I would expect the remainder of these outlying commodities to soften with all the others. 

On the flip side, a cattleman can pay anything they want for cattle and a futures trader backwards the market is dealing with significant leverage for which there is no opposing side, as there would be in a hedge.  Take all into consideration as you bid high and bid often.    

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​Hogs:

​Hogs were firm.  I did not see the index reading today.

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Corn:  

For cattle feeders, I continue to recommend owning the July $4.60 corn calls.  This is a sales solicitation.  This is for nothing more than keeping from having to feed expensive corn to expensive feeder cattle. I expect corn, wheat and beans to remain soft for a while. ​​

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Energy:

​Gasoline held on to small gains while crude and diesel fuel were slightly lower.  I continue to expect energy prices to move higher.  ​​​

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Bonds:

​Bonds continue to be weak, with the US dollar firm.  Every new purchase on credit costs more and the currency exchange rate is favoring imports and discouraging exports. ​

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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.