the Bull" Weekly Analysis
my opinion, the basis in fat cattle is dangerously wide. It won't matter
at this point whether cash falls to futures or futures rallies to cash,
the spread is dangerously wide. In the April, you can anticipate one of
two things, either cash drops $4.00 to $6.00 from one week to the next,
or futures will rally $2.00 to $4.00. Do not anticipate a tepid move of
cash and futures moving towards one another. Expect the extreme of one
going all the way to the other. The June and August is where the greatest
risks lie. At this juncture, suggesting cash will drop $16.00 won't produce
much of a profit in the futures. Therefore, I have not recommended selling
any more of the June and August contracts. Yes, it could get much worse
than the prices being reflected on those months. But at this time,
there remains too many "if's" to assume risks of $16.00 to $19.00 in an
attempt to protect????? Of great interest is the willingness of producers
to jump way ahead of the supply increases in their marketing's. When I
urged producers to do such, I did not anticipate this much agreeance of
the analysis. Today, this has caused a significant basis factor that will
be dealt with, it is just how is what we don't know. At this time, I'm
content to see if next week won't produce a rally in the futures before
doing anything else.
cattle remain of great interest. As the fats are causing a weak environment,
the feeders are not. Grass is going to green in just a week or two and
the demand for stockers is going to be increasing. I anticipate feeders
to keep their near even basis through the May contract. It is anticipated
to wiggle some, but anytime it goes negative, look for it to snap back
pretty quickly. I remain hesitant to market August and out inventory due
to anticipation of declining supply. As producers have worked through tremendous
numbers of steers, I take note of the significant increase in heifers being
marketed and placed on feed. Therefore, I don't anticipate this summer
and fall's supplies to be burdensome. As I write this, most of the contract
months have equaled their respective December low. This was the first target.
I could see some marking of time now for a week or two until we see what
cash fats will do and get the on feed report numbers under our belt.
Although fewer placements are anticipated going forward, it is by how much
will be the determining factor as to how long the side ways to lower trading
some good news, this current movement appears to be still part of a major
wave 2 correction on the weekly chart. Recall that adjustments made
to the weekly continuation chart of fats shows a similar aspect, just of
a different magnitude. If correct on my analysis, then somewhere just north
of $135.00 may be all that the feeders will be able to sell of to this
spring. So, as I watch for clues from the on feed and how many or fewer
placements are, and how bad the cash fats really get, I'm hoping to catch
the bottom of this major wave 2 correction. This current decline is very
counter seasonal. That could make it a little worse as prices are moving
lower when normally they would be moving higher. Regardless of anything,
I do not believe this price area in fat or feeder futures is one to make
major marketing decisions in. Next week may be lower, but basis tensity
is exceptionally tight in the fats and just meandering in the feeders.
I recommend you anticipate exceptional volatility next week.
continues to inch its way higher. It's reminiscence of the frog boiling.
The heat is being turned up so slowly, I don't think feed yard mangers
are taking it very seriously. Expectations of a cool, wet April could most
likely create some price gyrations as well as the March 31st planting intentions.
Beans remain strong due to increased crush for the meal. Wheat is the puzzling
one. The significance of the retracement this week suggests maybe a major
wave 1 is complete and major wave 2 is in progress. I'll be watching with
both eyes for a bottom of this correction in wheat.
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
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.