Live Cattle: Some have gone as far as to tout that it is back to business as usual. I am not as quick to discount the actions or determination of the President's attempt to meet a goal of reducing beef prices. Whether he can or can't, he is believed going to try everything, and potentially even more so with the backlash from the industry. Today's price action was volatile, and is expected to remain so until more details of what, when, and how much imported beef or cattle there will be. I continue to recommend maintaining a net short position, and on today's "Mid-day Cattle Commentary", recommended to maybe be a little shorter before the close. This is a sales solicitation. If you would have liked to have known this during market hours, sign up for the comment.
I anticipate packers to work diligently towards maintaining as much of the newly acquired positive margins as possible. When I see sales of feeder cattle with the whips on fire or toy jeeps doing wheelies, it suggests that some cattle feeders are still more than willing to inhale negative margins.
Feeder Cattle: This desire to keep inhaling negative margins is the best thing a hedged backgrounder could ask for at the moment. The basis is really wide with cattle feeders buying your inventory at what appears to be huge premiums in comparison to futures, and futures traders selling more, making the basis spread work in your favor. Of issue is those that are not hedged and now having to potentially enter into a very wide positive basis that exposes them to not only price directional risk, but basis spread risk.
I think it possible that the initial up move is complete, we are working on the B wave, and in expectation of a C wave higher that may or may not form the right shoulder. At the moment, it appears that futures traders are hesitant to start filling the gap, but cattle feeders not afraid to bid higher, causing further divide of the basis. Although a great deal of what has been anticipated has already come to fruition, there remains too many unanswered questions to set a direction in motion.
Corn: All ended lower today, but wheat. Beans are in an up trend, with Corn trying its best to do so as well.
Energy: Crude was weak, diesel fuel strong and gasoline holding somewhere in the middle. Diesel fuel has led this rally, pulling crude along with it. Today, I believe energy made a top with expectations of a lower trade. I continue to feel more recessionary factors than inflationary with Friday's Unemployment report to help confirm or deny. For the moment, I am leaning towards a lower trade in energy than higher.
Bonds: Bonds were able to push a little higher. I am no longer bullish bonds, but not bearish either. Coffee and equities are the only two markets left considered in a bull market. Gold and silver are believed to have run their course, along with cattle. These two markets being solo at the top suggests they are either way over priced, or all other markets are way under priced.
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
This is intended to be or is in the nature of a solicitation.” Futures trading is not for everyone. The risk of loss in trading futures can be substantial; therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not indicative of future results, and there is no assurance that your trading experience will be similar to the past performance.
