"Shootin' The Bull" Commodity Market Comments...
For Wednesday, September 16th
Live Cattle: Processing speeds are not anticipated to increase to any level that would lead me to anticipate leverage being afforded the cattle feeder. Cattle feeders are anticipated to have placed ample inventory on feed to finish out the fourth quarter. Since there are few ways to entice someone to go to work that does not want to, or is not eligible to due to immigration status, it is going to be difficult to see much change in current processing speeds. I do anticipate going forward that cattle feeders will place fewer cattle that could make the spring of '22 be somewhat shy of inventory in comparison to previous years. These few factors lead me to anticipate little change in cash price and further convergence of basis with futures.
Feeder Cattle: Cattle feeders, faced with increasing input costs in every form, are anticipated to be more selective in what they purchase and how much they give for it. As well, the longs that participated over the past 3 weeks are believed to have absorbed significant losses and not anticipated to return anytime soon after that shellacking. Short covering, taking of profit is what is believed would be any rally that materializes. Wave 4 is believed still in progress, even with the January having set a new low under Monday's. With none of the fall months having done the same, it is possible the January produced an irregular B wave of the wave 4. I won't rule out a C wave rally of 4 to approximately $161.00 October, if it does materialize at all. If it does not, and prices begin to slip lower, then I anticipate a move down to approximately $147.00 October. Sales seen recently lead me to anticipate further declines in the index.
Lean Hogs: Hogs were sharply higher and the index sharply lower. The two factors narrowed basis decisively today.
Corn: I get the feeling that grains want to go up something fierce, but are either being held back or just can't seem to quite push the hot button of Algo traders to get the ball rolling. Market action of the US dollar and bonds today were dampers to grain prices. The current administration is seemingly putting up more road blocks to trading with China. I have not read enough on this issue yet to comment on, but it does not bode well on the forefront.
I believe grains are bullish and the need for in great demand. That is why corn is not already heading towards $3.00 again as it has the past 5 years in a row. As well, why traders have been able to form a consolidation pattern after the large price increase instead of dropping prices straight back down like lumber. So, to make this simple, cattle feeders have recently, and will continue to, place the highest priced inventory on feed in the past 4 years for another month or so. Therefore, feed costs could help or hinder potential profits. I continue to recommend having your corn booked, priced, basis locked, or some form of retention going through to this time next year. Further drought impacts, either here or in South America, or simply greater demand due to inflation or economic recovery could send grains prices to ridiculous levels before sanity returns. So, consider using options and owning more of them than you need at a higher strike price so if there is a major event, you get to participate. If not, then you lose 100% of the option premium and hopefully are buying feed cheaper.
Crude: I have thoroughly confused myself in this energy market. Today, I got in my head that potentially, Wednesday's big run up could have been the same trade idea as cattlemen had three weeks ago. That is, sell the rally. Although today's price action was volatile and wide in expanse, traders were unable to push prices higher to any extent. As well, with it perceived the equities market is topping and more discontent for the Boston and Dallas Fed's admission of stock trading during the 2020 time frame is starting gain more attention. Senator Elizabeth Warren voiced her discontent of this issue and while I expect nothing to be done, at least most who want to be informed now know. One last time, it is not that they traded during this time frame, or even allowed to considering their position of all knowing and able to make adjustments due to that knowledge. The angst I have is the smug attitude they took in looking to be dumb. As if they didn't think they have any ethics or character to have to uphold. These are supposed to be the highest educated leaders in the financial world, with information flowing to them regularly from around the world. Banking information of all consumer debts, purchases and investments are readily available to them that help make decisions on whether to raise or lower interest rates. As well, every piece of economic data is made available to them prior to its release. I try hard to never complain, but damn if this doesn't make me want to.
US Treasury Bonds: Bonds were lower today and have now punctured both ends of the triangle. The US dollar was sharply higher today. All factors of trading in other commodity markets appeared to be hampered by these market's movement. As well, the Pacts being created that are seemingly only to further weaken ties with China, our number 1, 2 and 3 largest importer of US grains. Leadership by the current administration has so far led to significant price increases of goods and services, and energy. They are attempting to increase taxes, increase observations of personal banking and implementing significant restraints on companies forcing policies that are hypocritical and will force greater oversight in order to have companies comply. That oversight comes with a huge price tag and generally only works in favor of the overseer, that being the government. As you can see, I am becoming more perplexed by the day as volatility is wreaking havoc on markets. I anticipate decisive action to come from the current administration that will cause significant hardships on many and not help those for which the action was intended. Oh, then there is the 3.5 trillion dollar? I don't even know what this is for any more and I hate that millions of trees had to be sacrificed to have ink put on paper. As well, Nancy Pelosi will have to have it passed first so we can even see what's in it!