Live Cattle: A great deal of reality versus expectations will be played out over the next couple of weeks. Today's price action of futures is expected to have little impact on the cash markets today or Friday. Today's futures price action appears to be in expectation of what cattlemen may do going forward. Most likely armed with more information than today provided, those doing the bidding on Friday and into next week will have their hands full on whether to just keep bidding higher, or potentially contract in bidding, due to the expected impact outside markets will have on consumers. Of one thing I believe is for sure, there are very few chairs left to go around and the record player may start to skip. With boxes persistently higher, and the lag time between box purchase and retail sales, leads me to believe the consumer hasn't seen anything yet.
Feeder Cattle: September double topped, October, November, and January made what appears to be a 5th wave new high, leading me to consider that the front months have the potential to be a rare failed 5th wave. Since there is a divide between the front and back months, it is possible. As above, today's price action in the sale barn is not expected to have been impacted by today's trading. Tonight, with time to consider the outcome over the next several months, if not years, the mindset might be a little different than the current one of "just keep bidding". The price can't go down if you keep paying a higher price, seems to be the mindset of some. Although today's action was an attention getter, previous days have had more price action than todays. I continue to recommend you lay off every head of newly acquired inventory that will average up your previous marketing's and continue to put a scotch under the wheels of a much heavier wagon, on a much steeper grade.
Corn: Corn traded higher! After a dime lower opening, 4.73 million more acres of corn this year, and nothing out of line in US stocks, and corn rallied. Why? I don't know. However, it strengthens my ideas that I want to be long input costs and short cattle. The totally opposite ends of the price spectrum leads me to want to own what is less expensive and sell that which is more expensive. I recommend buying the at the money July corn calls and or the December $.20 out of the money corn calls. This is a sales solicitation. Although I am not bullish wheat, I am not bearish any longer.
Energy/Bonds: Energy was sharply lower. It fell off a cliff today. In my analysis, when a market is climbing a hill, and falls off a cliff, it has a tendency to want to climb back up the hill from which it just fell. I recommend topping off farm tanks and booking some spring fuel to help average down any higher price you may have paid on previous recommendations. This is a sales solicitation. Bonds are sharply higher, lowering retail rates. This is impacting bank margins as they have previously enjoyed a very wide spread between the Fed window rates and retail lending rates. That is expected to dwindle quickly with rates at the Fed level not anticipated to decline further, but potentially retail rates could as consumers could show contraction, or reservations in further borrowings.
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
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