The Cattle Range Home Page
February 15th
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. "Shootin' The Bull" Commodity Market Comments

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Commodity Market Comments 
  • “Shootin’ The Bull” -- Christopher B. Swift.
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    Live Cattle:Traders were able to push April above the minor wave 1 high of $126.30, above the irregular wave B high  of $127.20 and closed at a new high from the January 11th low.  The minor wave 2 is confirmed complete and minor wave 3 in progress.  The oscillator turned up sharply without having moved back below the zero line once it started up from the 1/11 low.  A trade of the oscillator to a new high above a reading of 2.717, and it will lead me to anticipate the upside target of $136.12 April to be met.

    As vertical integration increases, supply lines have to be maintained.  Especially with exports ramping up.  I think that during 2017, the industry took another step in vertical integration.  As packers feel the pull from exports, they have to have the inventory to meet the needs.  This is why I believe a great number of the stocker cattle went to commercial yards.  They know they will need that inventory.  As packers attempt to squabble over inventory from week to week, just keep in the back of your mind that they most likely have the commitments to keep them on guard all the time.  When weakness of any kind shows up, they attempt to exploit that.  Note that even under the worse duress of the equities decline, cattle didn’t react in a like manor.  Most likely because several in the industry knows what forward commitments there are.

    Feeder Cattle:Basis is scalding feed yards now.  Having gone from a very beneficial $12.00 plus wide positive basis to a negative $4.65 is bru tal to a feed yard.  This factor should begin to pull cash feeders higher as it is the cheapest place to find them.  Although March is tethered to the index, the other months are not hesitant to put on premium.  May set a new high in this rally and the November contract set a new contract high.  Although October did shut the gap, it is the first feeder cattle contract month that looks bullish.  More chatter is being herd concerning the discrepancies between stockers and feeders placed.  No weather has been conducive towards weight gains the past several weeks.  As those stockers will need much more care and tend to grow somewhat slower, they are not anticipated to be a factor this spring.  What will be interesting to see is when summer gets here and grass is green, movement of cattle, especially feeders and stockers will slow greatly.  If demand remains, it is anticipated to keep a firm tone under feeders for quite some time.

    Now to talk out of the other side of my mouth.  I know that anything at anytime can cause a disruption or potential change a trend.  Since I am primarily focusing on this springs marketing’s, and have the price movement favorable, I want to use it to secure a minimum sale floor.  With spreads widening between the three spring months, using $155.00 as the target for action may be slightly different for some.  So, sharpen your pencil, attempt to make sales of inventory as close to the expiration date of the futures/options contracts and we’ll start from there.  Now that there is greater than a $4.00 premium to futures, it makes it easier to lay into a minimum sale floor and dare the cash to close the basis.

    Corn: Depending on where the CME settles wheat, there could be some new high closes today.  I believe at this juncture, rain won’t help very much of the crop.  In fact, it may only help to keep a few cattle on it for a little longer instead of pulling them off and allowing it to go to head.  Corn was able to hold its own today and beans continue to advance.  Bean meal is the leader as both pork and poultry continue to run production at like levels in poultry and elevated levels in pork.  Although I am not in favor of hedging beans at this level, I have no reservations in booking a portion at this level were your basis friendly enough.  I know some elevators just keep widening the basis as prices rise.  This provides no help to the farmer and is clearly a means by which to increase the elevators profit potential or reduce their risk.

    Crude: The volatility in crude remains.  Flipping back and forth a couple of times today would have made many uncomfortable trading.  However, booking physical fuel needs at this level is not anticipated to produce any anxiety.

    S & P 500 Stock Index: I anticipate the days ranges in equity trading to narrow sharply.  I anticipate this to create a trend in an attempt to climb back to the  peak from which it fell.  Whether it exceeds it or not, I have no idea.

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    Christopher B. Swift is a commodity broker and consultant with Swift Trading Company in Nashville, TN. Mr. Swift authors the daily commentaries "mid day cattle comment" and "Shootin' the Bull" commentary found on his website @ www.shootinthebull.com

    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 their 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.

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