Live Cattle: Futures traders, having shifted basis considerably last week, were seemingly a little more reserved starting this week off. There is not much change starting off the week either. Cattle feeders were able to narrow losses significantly with last weeks higher trade, down to just over $100.00 per head loss. Any backing up of fat cattle prices would be anticipated to continue to show losses. Until some of the feeders, placed in a short three week time frame at the end of last year, start coming off, the losses are anticipated to remain. Whether a cattle feeder or backgrounder, but someone paid a premium at the end of last week to own a weight class that would fit into the feeder cattle index. With fat prices not that much higher, and a $7.00 plus jump in feeder prices, cattle feeders simply have to rely upon packers ability to pay up for inventory. Packers lost significant ground last week with boxes lower and cattle higher. The front end of the market is relying solely upon a higher price for fats, all the while, cattle feeders continue to bid higher for inventory, making for that much higher of a price needed to be achieved. Again, none of the above depicts a price direction of higher or lower. The comments are the recognition of how lopsided the margins are at inception, how much higher cattle prices have to go to return margins, and if prices don't go up, the amount of working capital at risk is significant for any size operation.
Feeder Cattle: Last weeks higher futures trade was not the trader offering premium, they were simply keeping step with cash. Still, not much of a change in open interest, suggesting the interest is only by a few. As well, it appears that fewer individuals are maintaining positions as the funds and managed money are taking on more of the positions, but again, no increase of open interest. So, instead of mass interest, it appears more of a mass restructuring of participants. It's pretty much all or nothing from here. Historical highs of the index, and contract highs are all within short spitting distance. Cattlemen will have to become even more aggressive in bidding higher to keep the momentum going. How to continually push the higher price of cattle, down to the center of the plate, is seemingly being questioned.
Corn: Corn struggled with the higher opening from Sunday evening. By the close, the front end was steady and back end a little lower. A great deal of conversation is being had at the moment about swapping acres to beans, due to fertilizer. As well, beans are already in a fledgling bull market with bean oil a leading component of biodiesel fuel. For the moment, and not nearly as exciting as watching energy trade, but corn appears to be in a wave 2 correction with a wave 3 rally anticipated. Wheat looks very similar. Drought patterns persist and seeds aren't even in the ground yet. Due to the energy aspect of the grains and oilseeds market, this year is expected to be volatile with more price expanse than currently seen.
Energy: Energy gave back the lion's share of gains made at the Sunday opening. Still, all were higher on the day as energy is in a bull market with little to no change in the reasons for it being higher. Current events are anticipated to lead to further escalation. The lopsided events of this military action lead me to believe that the US is a little over confident, and to expect domestic terrorism, and potentially coordinated. Upside target for May diesel fuel is between $5.50 and $6.00. I do realize that with any tweet from the President, the amount of volatility and price expanse would be immense. Attempting to weed out the days trading, the close only charts help to show that energy remains in a bull market with current lower trading a correction.
Bonds: Bonds and equities both ended the day higher, after a sharply lower opening. This type of price action has been somewhat normal with multiple times having gapped sharply lower, only to close higher. Both markets have a vested interest in not going down as bonds moving lower increases interest rates and lower equities, subtracting from the wealth of the nation. Bonds are believed in a bear market with lower to go as inflation continues to boil on high.
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.
