Live Cattle: New lows from contract high, and a very weak recovery from, leads me to believe that cattlemen are in no hurry to expose themselves further to headline news risk, caused by outside market forces. As these issues have nothing to do with cattle, it is significantly more difficult to ascertain how much cattle may or may not be impacted by current events. The issue will be whether or not fuel prices move higher or lower. Higher fuel costs impacts most everything consumers and producers need. Hence, the more having to be paid for energy, whether home, auto, or business, is less to spend on other items, or in the case of business, reduction of profit margin. Since this is a developing situation, for which all is out of our hands, and known recommendations to own at the money puts, the only other recommendation I have is to be extremely prudent in your decisions.
Feeder Cattle: New lows from contract high and an even weaker rally than the fats were able to muster. Cattle feeders are expected to have a significant amount of increased inventory to work with in the coming weeks as the video sales tend to market large swaths of inventory at one time. How excited cattle feeders will be to add length to their risks is unknown. As above, having to work through factors that are not cattle related, but have a potential severe impact on, makes the situation all the more risk laden. Were futures traders to push basis to within $5.00 positive, per respective contract month, I recommend you go to work on marketing newly acquired inventory for fall marketing's. Do not forget about the over 650K head of Mexican cattle that would like a room in a north Texas feedyard. Both Mexican cattlemen, and some Texas feedyards, are dependent upon sales and placements of Mexican cattle. With a multitude of hosts for the fly to travel around on, other than cattle, that have no reservations crossing the border, and a great need for cattle, as box prices near $400.00, this situation seems a little lopsided.
Corn: Corn perked up a lot today with the higher wheat trade. Beans took a back seat, but not by much. I anticipate beans and wheat to trade higher with corn struggling to keep up. Weather is a very mixed bag this year with down south floods and river bottom issues. I hear of some drought areas, but more concerning will be the heat coming in next week to some areas. For corn, this should be good growing conditions, but for beans maybe not. The inability to get out a second crop of beans behind wheat is challenging at the moment. As well, beans planted along river bottoms remain in jeopardy through this weekend as more rain is forecast through Thursday evening. Couple this with the support of the bio-fuel mandate, and beans are expected to trade higher.
Energy: Energy has been higher, lower, and now higher as I write this. The situation in the middle-east is ongoing and no telling what may happen next. So far, topping off farm tanks, or booking some fuel now, will be about $.30 to $.45 higher than just 18 days ago. A trade of diesel fuel between $3.00 and $3.80 will be nothing new.
Bonds: Bonds are higher, but losing steam after Powell kept rates unchanged and lowered expectations of an improving economy. There was no dissension among the ranks.
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
An investment 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.
