Live Cattle: Whether higher or lower, the new high close on the daily close only chart, and gaps starting to be filled, leads me to make some difficult marketing decisions, at a time when it appears nothing now can stand in the way of higher prices, simply due to "there isn't going to be any more cattle". The past 14 days has emboldened producers to return to assuming significant risk for which only an ever-increasing price for fats will return input costs.
The 5th wave of the C wave of major B is in progress. Price action today is believed nearing a top and offered producer's an opportunity to execute hedges under favorable conditions. If concerned about "missing out" revert to only a long put option. If attempting to secure a higher minimum sale floor and not as concerned about "missing out", then the use of the fence options spread will help to produce a higher minimum sale floor in return for the inability to make any more above the short call strike price.
Something to consider. At the moment, the cattle, feeder cattle, and box beef markets are in turmoil. From the largest of participants to the smallest, all are having to make difficult decisions in the most volatile and price expansive market this year. The number of abnormalities all participants are having to contend with are exceptional, as seen by the price expanse. With this, I recommend you do not place yourself into a position that is make or break.
Feeder Cattle: Cattle feeders inhaled a deep breath of extreme expectations of sharply higher price for fats. Futures traders helped to converge basis but seemed very cautious about narrowing by too much. Back months especially. The higher trade today made option pricing a little easier and producers had a great deal of price expanse to work with.
The anticipated 5th wave materialized today on the daily, close only charts. Whether complete or not remains the question. This is the level I recommend selling calls against previously recommended put option positions. This is a sales solicitation. If you do not wish to limit upside potential, then sit tight and let's see what unfolds before the end of the year. If you wish to manage the basis spread, and obtain a higher minimum sale floor, then initiate the fence options spread upon entry.
I continue to believe the optimism of the cattle producer to have exceeded previous levels, at a time when all others outside of the cattle market don't seem to share the same exhilaration of the higher beef prices, higher cattle prices will create.
Corn: Plus on the day was about all grains and oilseeds did today. Export news fell flat, and beans continued their decline, even though closed a tad higher. With the huge break lower in energy prices today, biofuels will have a tough row to hoe.
Energy: Energy was sharply lower with crude oil breaking the uptrend line of a triangle. The move prior to the formation of the triangle was lower, leading me to anticipate the breakout to come to the downside. With some appearance of a Russia/Ukraine peace deal being mulled over, it has relieved the pressures on refining and with products now moving lower, crude is resuming a down trend.
Bonds: Quantitative easing is back. Like so many other expressions, that have been softened to fit a narrative, this administration calls the 40 billion dollar a month bill purchases a Reserve Management Purchase. This fits in with food stamps are now Supplemental Nutrition Assistance Plan, and shell shock becoming Post Traumatic Stress Disorder. All to fit the narrative being pushed. So, stimulating more suggests anticipating more inflation, and with more consumers on Main than Wall Street, I anticipate the inflation to speed up the recession that many on Main Street have been experiencing since the Biden administrations handouts dried up.
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.
