the Bull" Weekly Analysis
my opinion, several pieces of information were gathered this week to help
support my analysis that the current environment is less likely to produce
a bear market. Europe is on the mend as they have announced the reduction
of quantitative easing sooner than anticipated. This has pushed the
US dollar to a new low in this decline at the close today. Bloomberg
posted an article on Friday reflecting the Chinese agenda of sourcing food
for their people. As well, China lifted a ban on French beef this
week. This action mirrors the lifting of the US ban last March.
Retail sales rose in the month of December and economists relayed this
week that US employment is near or has reached a maximum. This action
has caused increased spending by the consumer and is anticipated to help
absorb gluts of commodities. Interest rates rose sharply this week with
the US 30 year bond futures setting a new contract low. Rates are
rising in reflection of the increased consumer employment. Lastly,
with fat cattle futures down more than $15.00, feeder futures more than
$20.00, the feeder index down $14.00, boxes approximately $8.00 and cash
fat prices down $5.00, and this being the worst part of the year seemingly
for the negative's, there doesn't appear too much more to have to shave
off price to keep it moving through the pipeline.
this time, I perceive the situation to be that prices in futures are declining
due to lack of buying, more than overwhelming selling pressure. The
"money" that has shown up unexpectedly at times this year is thought to
be on the sidelines. I think they are waiting for spooked producers
and bearish futures traders to push prices below value to get the biggest
pop from the market when they decide to come back in. I do not know
what their trigger is, but I think they are already attempting to dig out
a toe hold. The environment appears at present to be more fat cattle
related and that is with perceived elevated inventory to be marketed at
present and the consumer having to deal with unpleasant weather in the
north east. When markets reopen on Tuesday, half of January will be gone.
As seasonal tendencies begin to firm towards the 1st of February, I believe
data revealed to that point will be friendly towards upward price movement.
Supply at this time is like kicking a dead horse. I know it is there
as does everyone else. That in itself may reduce its impact.
the feeders where I anticipate the first thrust to come from. Now,
I fully understand that the light cattle placed in October, November, and
potentially December are in the pipeline and that may make for less demand
in the spring. However, were the demand to remain and numbers pushed
out of lots in January and February heavy, we could see feed yards go bid
for inventory weighing 900#. This is where the excitement could be
immense. While there may be elevated numbers due to expansion, there
may not be elevated numbers of 900# feeder cattle ready to go on feed to
finish filling the pipeline this spring for summer fats. As time
goes on this year, the impact of expansion will be felt less. Although
I do not expect a liquidation phase, it could stay stagnant as demand grows
or remains elevated. One thing I don't expect is further expansion.
With interest rates increasing and most cow/calf operators still dealing
with over priced heifers or cows purchased in '14 and '15, I don't see
a ferocious appetite for expanding. My analysis suggests traders are beating
out a bottom, similarly like they did in June and August of '17.
I would dare to say that March futures above $145.00 would spur some real
interest in buying. Especially if this were to come at a time when
futures are crossing paths with the index and moving into a negative basis.
grain report offered no glimmer of hope in reversing grain prices at the
moment. Wheat continues to be on the radar, but it is a smoldering
fire and no air at this time.
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.