Shootin' the Bull about the screwworm fly
“Shootin’ The Bull”
End of Day Market Recap
by Christopher Swift
1/30/2024
Live Cattle:
What keeps the screwworm fly from flying across the border? The length of time the border remains closed is becoming fishy. Seemingly, details of this issue are nonexistent. Making it even more smelly. Today's article on RFD-TV stated the border opening in the coming weeks. Potentially, this may be some of the weakness in cattle. Cattle feeders are expected to have more inventory to chose from in the coming weeks with wheat pasture cattle and a reopening of the border. Continual elevated beef demand is coming into question again with the rise in commodity inflation. Regardless of any of this, cattlemen are forging their future today. If able to conduct business in a capital intensive industry, there is most likely a seat at the table. Hedging won't solve this problem as volatility is expected to continue to be fierce. It will help, but this is a dynamic shift in the industry for which growth is believed a necessity.
The tiger trap is deep in the fat market. However, "if" there is an excess of cattle to be placed this spring, when normally not, it has the potential to greatly skew 3rd and 4th quarter fats. Especially if any downturn of the economy has been realized. Recall consumers are still spending at an elevated level with the current administration attempting to slow that at all costs.
Feeder Cattle:
Traders dug the tiger trap pretty deep today. This will merely create more volatility. Of interest going forward will be the next three weeks. The Moore Research shows fats and feeders topping at the end of January, declining into the first week of February and then rallying to top for months between the second and third week of February. With the initial decline already having started, I will keep close watch for a rally that may or may not produce a new high, but will spur further action on hedges for spring and fall inventory somewhere in this upcoming time frame. Other than this, cattlemen continue to be willing to pay to play and as long as they do, futures will continue to create wide basis spreads and then narrow. Again, as consumers are still perceived as spending at upper levels, any shift to lower spending habit would be anticipated to slow beef sales.
Class III Milk:
I recommend buying June milk and December call options on milk. This is a sales solicitation. Dairy replacement heifers are short, not expected to be replaced, with the advantage of milk prices being higher. This recommendation remains valid.
Corn:
Corn and beans corrected a little from Wednesday's trade to new highs from contract low. I expect a resumption of the up trend. I do not have targets, but don't see much signs of a reversal to lower either.
Energy:
Crude and gasoline were higher today. Still trying to get off the current lows for the week, but some headway was made today. I expect energy prices to continue higher.
Bonds:
Bonds and notes are firm, but not by much. Stimulation of China would be seen as an inflationary event that would impact the US. Especially in oil prices. As the consumer continues to spend, I see no reason for rates to move lower. To quell further spending, it appears rates need to be even higher.
This is intended to be or is in the nature of a solicitation. 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 the 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.