“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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5/24/2024

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Live Cattle: I won't be able to write the "Shootin' the Bull" commentaries next week.  Mr. Winward will write the "Mid-Day Cattle Comment" so make sure you are signed up on it to continue service next week.

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In my opinion, not enough transpired this week to change much of anything.  Futures traders converged a large swath of basis in the fats, and diverged in the feeders.  More traders found this week's price range interesting, reflected by the increase of open interest.  While it may signal the return of the funds, I believe to some extent the new shorts are hedges, taking advantage of this week's narrowing of basis.  With the triangulation in price, the summer doldrums appear to be starting earlier this year.  Without the knowledge of Fridays on feed report, I continue to expect the agenda to remain intact with significant recognition the goal is being achieved. Of the most notable factor that transpired this week was the egregious spreads between starting feeder and finished fat.  When I saw last week's feedyard closeouts in the black, I had to scratch my head and say how?  Well, a quick look back at when today's slaughter cattle were placed, it was in January, at a $27.00 discount to today's feeder price.  As well, from the time placed to slaughtered, the fat cattle market increased by $15.00.  Hence it took a $42.00 swing in price of lower feeders and higher fats to produce a profit. That is a tremendous amount of price fluctuation to transpire to break even.  When viewing the starting feeder price for October fats, the range for May, via the index is between $239.53 to $248.81.  At 850#, at a cost of gain of $1.00 and 550 pounds, leads to a breakeven on a 1,400# steer between $184.71 and $190.00.  October futures, as I write this Friday during market trading, is at $184.00.  I know many are cherry picking numbers or calculating them at weights, pushing current levels, to claim profitability in feeding cattle.  This seems like a great deal to have to go through to show profitability. I believe it simply that feeder cattle prices are too high. There were expectations of expansion that have not materialized, as well as, thoughts the consumer would pay any price with no suffering of demand. What we have come to realize now is that the US can increase beef production with what is available, and consumers have already shown they will shift with the sharp increase for the grind.  I believe the industry is faced with having to pull the rug from underneath feeder cattle prices, or face further vertical integration in order to participate in beef sales, and therefore profit.  

Many of you already know Patrick Gottsch, founder and owner of RFD-TV, passed this week. Having been affiliated with the Market Day Report and Commodity Wrap, I was able to experience firsthand how important and passionate Patrick was to rural America.  Scott Shellady asked me about him this week and I had to admit that I never had the privilege of meeting him.  However, knowing the operations he built, it reminded me of the story of Admiral Lord Collingwood's strolls through the English countryside with pockets full of acorns.  As he walked, he poked holes with his cane to plant the acorns, and express that he did, so the British Navy would never run out of oak trees for the timbers to build the ships that upon which the country's safety depends. Patrick planted trees in his life.  Tress for which others are shaded by, employed, and harvest fruit from that he planted.  I see a great deal of aged producers that have either like mindsets as this, or have actually planted seeds as well.  I see the younger generation forego planting trees, as they take too long to grow, and knowledge that few who planted the trees will ever sit under their shade. I encourage you this day to go plant a tree seed.  Something for generations to enjoy.  This will give you a completely different outlook on life when you are able to help others you will never know. 

Grains were dormant pretty much this week.  The continual rains in the US and flooding in South America has changed the picture a little on the grain markets.  This week, I recommended for producers to fill every nook and cranny with feed that might keep you from having to pay a premium for futures contracts, or get you through any hiccup prices may have until planting complete. Farmers would be urged to finish marketings were something to transpire that pushed corn or beans higher.  Energy prices resumed their down trend with new lows from contract high in the July crude oil.  Although energy prices firmed, going into the three-day weekend, it is believed the trend is established with a downside target to approximately $70.00 July crude.  Bonds stagnated this week as more economic data suggests inflation only slowing, not having come down or in no way gone away.  Albeit from fact, I continue to anticipate bond prices moving higher as government spending continues to fuel the inflation, while the Fed is tasked with lowering it. The extremes of both are believed fueling the spending of those that if were not given money wouldn't have it to spend, and reservations in spending for those who work for it, knowing how hard they had to work to obtain the money.  Potentially uncouth of me to say so, but that is the way I see it.  

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.