Live Cattle: Opinions appear well thought out, mostly agreeable to, but yet most likely will have no impact on market fluctuation. That is because the market is believed betwixt and between the next most probable move. There have been no imports of cattle or beef, but yet both are in great expectation. Until the imports of beef or cattle arrive, producers and packers will continue to discover a price at which they can trade. Cattle feeders that jumped in front to market additional inventory last week have helped packers to have a little more inventory to work with. As well, there is a belief that there are about 8% to 10% more long fed cattle on feed today than same time last year. Whether fact or fiction, the stranglehold on the cattle market has been broken. Producers may or may not be able to produce a like scenario that propelled cattle prices to historical highs. I think it possible that government influence came at just about the same time as it was recognized the consumer may still be willing to pay a higher price, but consumption rates have decreased. I anticipate a great deal more of hyper volatility and great price expanse as significant abnormalities, developed over the past couple of years, attempt to return to normalcy.
Feeder Cattle: The cattle industry is experiencing some rise of input costs. Diesel fuel is up $.48, 23% higher than on the October 17 low. Corn is up $.20, 5% higher than the October 14 low. Note that a number of commodities changed directions in very close proximity to one another in time. Although feeder cattle futures have declined over $68.00, 18%, the index has only declined $32.14, 8% in the same time frames. With the decline in feeder cattle prices, along with fat cattle prices in the future, input costs are anticipated to have a more dramatic impact on cost of gains going forward than previously.
The index remains $20.00 plus from the first retracement area of .382% or $325.01. The lower end of the range at .618% is $293.20. I anticipate at least for the .382% to be met, if not the .618%. So, as futures traders narrow the wide positive basis, I recommend you put a sharp pencil to paper and see what you may need to accomplish before futures attempt to potentially beat the index down to the retracement levels. As importation of cattle and beef is still believed "when" not "if", producers are urged to pick price levels they would be willing to market inventory and make those transactions upon achieving those prices. For the moment, the November 4 high is the ceiling to break through. With today's attempt falling short of, and having sold off at the close, this may be the highest approach until backed off for another running start.
Of one thing I believe for sure, everyone's opinion is as most likely correct as the others, with great expectations that the market does not care about any of those opinions. Yes, it might should go up because there are no imports yet. Yes, it might should go down because those imports are anticipated. At the moment, basis is the only concern as it is wide, positive, friendly towards cattle feeders and detrimental towards backgrounders. As the basis converges, it is anticipated to be of greater benefit to backgrounders, where as the lower trade anticipated from this rally, of benefit to cattle feeders. For whatever my opinion is worth, a $10.00 or less positive basis to the spring months is believed an opportunity to protect against potential adverse directional price move and narrowed basis spread risk to $10.00 or less. I anticipate significant volatility and price fluctuation for days to come.
Corn: Bulls are climbing a wall of worry. World supplies appear more burdensome than bullish. Basis in grains and oilseeds is horribly negative and carry woefully shy of covering the cost. I think the fundamentals appear weak, but prices are moving higher, so it leads me to recommend cattle feeders fix variable costs when able and see what the next year brings in acres planted. Wheat has been in a bear market for longer than corn and beans. It appears that the first move off contract low has formed a 5 wave pattern. This leads me to anticipate a higher wheat trade in the future. For those who trade spreads, consider a long wheat short corn spread in either July or December contract months. Recall though that using July will be new crop wheat and old crop corn, while the December contract will be new crop corn and old crop wheat. Due to the excessive carryout into '26 of corn, and new crop issues for wheat, the July contract is the one I would prefer. The chart is below.
Energy: Energy was higher across the spectrum with diesel fuel continuing to lead the way. Although maybe not a breakout to the upside in crude, it wasn't beat on nearly as bad today as in days past. The higher diesel fuel is an issue that was addressed early in the summer and again in early fall. With the sell off having taken place, and more signs of recession than inflation, I believed energy in general would trade lower. The impact on Russian refineries though has seemingly been enough to push prices higher for energy and especially diesel fuel. It takes a lot of to run a war machine and Russia has a big one.
Bonds: Bonds were soft until private forecasts suggested a decrease of employment. This pushed bonds up, but have not made further gains since. I am skeptical on bonds as to the next most probable move. However, I am becoming more convinced daily of the two tiered economic platform.
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.
