Live Cattle: The exceptional price and volatility of energy, caused by the current conflict, is impacting all sectors of cattle production through the increase of input costs outside of the cattle. Energy, feed, and the price of money have all increased significantly in a very short period of time, unexpectedly, and may or may not recede anytime soon. When combined with the loss of processing capacity, it left me with few choices but to recommend taking extraordinary actions of buying at the money puts when prices were already $1.00 plus lower. Preference in making these recommendations tends to be when prices are higher or basis narrower, but in this case, where I anticipate unintended consequences, or an escalation due to such a one sided event, I felt I had little choice but to make recommendations that may turn out to be the best, but surely won't be the worse. Losses per head will mount significantly with cash lower and feeder cattle prices from October '25 still climbing when placed. Recall as well that even though futures fell approximately $85.00, the lowest index reading was only $46.00 from the top. So, there aren't a whole lot of cheaper feeder cattle from that break, as the price decline was only 30 days, and 30 day's later, cattle feeders paid even more. Something to remember, things are never too bad that they can't get worse.
Feeder Cattle: New lows in futures with traders not seemingly caring too much about how wide the basis spread is. That is because there is great expectation of a sharply lower feeder cattle index on the way. The advent of outside market factors will not fit the narrative of no more cattle. As above, I made recommendations under market duress this morning with unknown's of how much better or worse the current situation impact on energy can have on producers. We can guess pretty quickly as to what consumers will do, but this is an increase of input costs, outside of the cattle market, that few anticipated, and we are having to find out what producers will do next. Not having the luxury of knowing what they will do, I made difficult recommendations in the attempt to avoid widening the basis further.
With three weeks to go on March, consider how low you think the index will decline, and then, were March futures to reach that level before the index does, I recommend taking off all March hedge positions. This is a sales solicitation.
Corn: Traders pushed new crop corn and beans to near Sunday evening's session high. I made recommendations for farmers to buy the at the money put on November soybeans and December corn. This is a sales solicitation. Whether this will improve your average or just the start of, with grains a component of energy, and energy the reason for the rally, do something about it while it is available to you.
Energy: Comments from the President, that large portions of Iran's defense systems have been placed out of commission, leads me to anticipate ground troops, as the military actions may have knocked out large swaths of defense systems, but did nothing to disarm the fanatic with the AK-47. If this operation is to overturn the government, and the government doesn't want to be overturned, further action will be deemed necessary. As well, this has nothing to do with how one sided event this is, surely capturing the attention of all others watching from the sidelines and maybe wanting to see if they have a need to intervene. I do not believe this operation is nearly over with, but potentially just starting. I anticipate new highs in energy, barring a resolve.
Bonds: Bonds are sharply lower because inflation is sharply higher. It will get worse before better as oil companies will sell the higher priced fuel for as long as possible, and I don't think the retail pumps reflect the current price. Bonds were just a little over a point from contract low at today's low.
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.
