“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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8/12/2024

Live Cattle:

Elevated beef production, over every expectation of being lower, continues to have me wondering why prices for cattle, and to some extent beef, continue to be so elevated. Via the volume of stocker and feeder cattle sales, cattle continue to be moved and this time frame is expected to be a large lateral move of older cattlemen making way for younger ones. Of the main concern I have is the level of spending the consumer and cattlemen have been accustomed to the past 4 years.  I think it would have been difficult to have achieved the demand seen over the past 4 years, or businesses appreciate, without the significant government handout.  This leads me to ask, how can consumers and businesses continue to spend at elevated levels when the money supply is shrinking?  I think the question has already been answered. That being, neither the consumer or business is spending at previous levels sustained during Covid.  With the packer in the red, the cattle feeder expected to get deeper in the red each week, and now a great deal of backgrounders stuck with historically high priced calves and stockers, and no place to sell them higher than today, it appears the industry will be ripe for further vertical integration to take place.  As we take our recommendations very seriously, and fully understand past performance is not necessarily indicative of future results, we hope you have benefited from such when stated to "do whatever it takes to put a floor underneath production" weeks prior to the collapse in price.    

​Feeder Cattle:

​The Hare has the Tortoise hot on its heels now with the index down $16.31 from its high.  The pause in futures moving lower has allowed a few large steps of the index lower to slam the basis into convergence. The swath of quick sand is still wide in the out months when pertaining to the positive basis.  It is narrower now and with corn seemingly may having stopped going down, it may embolden futures traders to send the Hare hippity hoppity farther down the bunny trail of maybe 15% this time.  That would put the index at $222.50.  To be bullish, I think you have to come up with a way to have the consumer, businesses, and cattlemen achieve a spending rate equal to or greater than during the past 4 years.  As we can see, cattlemen are just now starting to back off while consumers have been in some form of contraction and most businesses seeing some decline in earnings.  So, barring a large printing of money, it appears the high of all the excessive Covid spending is over with and the continual upkeep of the illegal immigrants will further drain every town, city, metro, county, state and Federal government. So, find a way to give people more money, or it appears they are tapped out.  With today's unexpected rise in energy prices, the consumer is getting no breaks at all in anything retail or wholesale.  Expect more beatings until moral improves.    

​Hogs:

​Hogs were mostly mixed.  The index is softening.  Watching traders unfazed at selling the large discount of futures to the index is a little spooky.  Hence why I have laid off wanting to be long.  There is a strong seasonal tendency to trade higher, but it is closer to the end of the month. ​

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Corn:  

Corn was higher as USDA lowered the acres by approximately 3/4 of a million, raised yield by 2 bushels, and dropped the carryout by a fraction. All in all, the report appeared neutral and that was enough to see some shorts begin to cover after this morning's new low.  While I do not think the report was bullish in any way, I don't think it was so bearish that $3.00 corn is coming next week.  A trade back to $4.20 to $4.50 December would not be out of the ordinary, and as harvest starts, it will produce a new set of fundamentals to overcome.  Beans traded lower and stayed lower.  There was seemingly no damage at all and every acre anticipated planted.  So, that will be a sheer demand game on oil and meal to help pull beans from now under $10.00.  

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Energy:

​Energy was sharply higher today.  More sabre rattling in the middle-east kept the bid firm all day long.  This appears a monkey wrench thrown in the mix.  Although diesel fuel beat out gasoline for the higher trade today, I don't expect this to last very long.  I may still want to top off farm tanks, but not as sure about booking harvest fuel just yet. ​​

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Bonds:

​Bonds were higher.  I believe the correction to be complete and economic numbers this week will be crucial in bond price movement.  Expect a great deal of volatility in the debt markets this week with Tuesday the PPI report, Wednesday the CPI, and Thursday Business inventories, Jobless claims, Retail sales and Capacity utilization/ Industrial production. This will be a slew of reports for the bond market to chew through and will help to mold the next Fed's decision.   ​

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