Live Cattle: There is not a lot to add to what has already been said. The energy aspect is anticipated to impact all markets, whether directly or indirectly. Until the military action is complete, or a resolve seen, I anticipate energy prices to remain elevated. Basis remains wide and ladens producers with price and basis risks. A front end loaded problem may be a larger percentage of inventory being long fed. This factor, along with basis and the slaughter manipulation taking place, leads me to believe the best place to sell cattle is today.
Futures traders have a lot of room to work with in the discounted futures. Rallies will be anticipated, and sharp at times, but I continue to anticipate a softer trade, following the seasonal tendency into the first of May.
Feeder Cattle: As above, not too much to add here. The projected losses are severe and discounts of futures compounding a problem of having bid oneself into a grossly negative margin. The wide basis and slow melt of cash prices will be anticipated to cause sharp rallies to narrow basis, but I don't expect traders to push basis to even or negative but could narrow it further from where it closed today. Were traders to disregard basis, and push futures lower, it would suggest there may be more to this than we know at the moment.
Corn: Corn and beans gave back most of the gains from earlier in the session. With new highs made in both new crop corn and beans, consider that if you have not done anything yet, this is believed a good spot to start. For those needing to book feed costs, the July call options offer the buyers the right, but not the obligation to buy corn at the strike price. This appears as a way to lock in feed cost with a limited risk derivative in a time frame seemingly very uncertain.
Energy: Energy continues to roar higher. Since this is unfolding rapidly, there is no telling what the impact will be short or long term. For the moment, it is anticipated for energy to continue higher. With nearly a $1.00 gained in the past 6 trading days, and historical highs still nearly $2.00 away, farmers, ranchers, trucking, railroad, and shipping companies, including airlines, of all kinds, will have to do something, as allowing for adverse pricing can spin out of control quickly. What it will most likely do is force a great deal of decisions to be made under duress.
Bonds: Bonds were lower. Commodity inflation is as real, if not more so, than core inflation. Although deemed as volatile and short life spans, the damage commodity inflation can do, in a short period of time can take years to overcome. Core inflation can be managed with higher wages and greater employment, but not much more than a dramatic shift in supply and demand cause commodity prices to act or react.
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.
