Live Cattle: The cash trading this week has seemingly caused futures to run towards it, converging basis. Without expectations of higher cash, I would not expect today's gains to hold. The push to new highs in August and October lead me to believe there is a sequence of events unfolding. That being, futures traders will be in reserve by not producing premiums for which would be expected to be sold into. So, they hold back and when spot months run closer to expiration, traders simply push the futures to the levels of cash. This took place in the June contract, and may in the August contract. When viewing how little December and February moved in relation to, it leads me to believe this sequence will continue until a more directional aspect can be derived. Today's price action does not change the recommendations to continue to do whatever necessary to make sure there is a floor underneath your cattle. This is a sales solicitation. Nothing has changed for which you don't still need every penny higher that can be achieved, as well as, keeping the vast amounts of working capital from dissipating. Leading me to recommend using a long put option only at this time. This is a sales solicitation.
Feeder Cattle: As there is no longer any basis spreads in the feeders, it's pure directional trading from here. I believe the thin volume of human traders is allowing for the wide price swings in seconds and minutes. Humans cannot react that fast. As volatile, and sometimes exciting, as the trading has been, the same ranges continue to be traversed over and over again. I see no changes that would lead me to change my analysis. I believe it will be more difficult to entice cattle feeders to continue at this level, or accelerate to a higher level, than it will for them to take a breather and see if a 10% to 15% break in price materializes. In all honesty, it doesn't matter much as you can fix prices at pretty much whatever you need to with an options strategy that will allow for as much leeway or formidable floor you desire. It's only if you don't do anything do you get the full benefit of being wrong or right. Due to the inflexibility of some derivatives or alternative marketing manners, the flexibility you can achieve using futures and or options should be a compliment to other forms you have in your tool belt. Although a screw is a screw, there several variations of heads on the screws for which different screwdrivers are needed to complete the work. You can even manipulate some to work with others, but there is a tendency to strip the head and have to redo whatever you were doing to begin with. Keep this in mind as you continue to build your tool belt with derivatives that help you achieve the goal of managing price risk.
Hogs: Hogs were mostly lower with the index up $.69 at $90.77.
Corn: Corn and beans were firmer today. Just about every commodity started off lower this morning, and like just about all of them, corn and beans reversed higher as well. The current rally is believed a wave 4. Further downside movement is expected.
Energy: Energy was even more volatile today, as like most commodities, it started off sharply lower and then rallied sharply to trade plus on the day. Today's rally changes nothing as none of the complex was up much on the day. It was the reversal from sharply lower that made today's trade appear like a big move up. It was, just not on the day. I continue to anticipate energy to trade lower.
Bonds: Bonds traded both sides of unchanged but ended the day firmer. I continue to expect bonds to move higher. Like multiple other commodities, the volatility is immense. This current time frame of high volatility, in most all markets, leads me to believe a great deal of adjusting is being done while some market prices remain at the top or bottom of their ranges. With little economic direction from the Biden administration, none from Harris, and Trump still about 4 months out, the turmoil is expected to grow, not subside.
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. .
