Shootin' the Bull about a lot of price action this week

“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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9/27/2024

Live Cattle:​

In my opinion, a whole lot of market action took place this week for which most had no answer for, myself included.  Packers, apparently short bought, stepped up to the plate this week with higher bids.  This raised the question of, will this be a one-time event, or begin a trend?  I believe a one-time event, simply due to how much box price has dropped.  Paying a higher price for cattle, and taking a lower price for beef, leads to negative margins.  Nonetheless, packers bid and obtained inventory.  Cattle feeders didn't react the same way this week and kept the index level in line with the previous two weeks.  This week was all about the futures trader, whether rank, fund, or producer, futures traders pushed the remainder of this year's contract months back to a negative basis and shored up next year's basis to within mostly $6.00 positive.  Everyone from the most novice to the oldest dog has been able to experience a massive basis shift in a very short period of time, reflecting how abruptly situations can change. That is where I sit today, not knowing what the next abrupt change to prepare for.  Even worse, with basis now more even than one-sided, direction will play a much larger role than when copious amounts of premium or discount were offered to all.  Not to say that you have to be right, there is just a lot less wiggle room for error than previously.  I continue to believe that due to the growing aspects of sailing in uncharted waters, I prefer to have marketing parameters around production or procurement than hanging out willy nilly.  

 

In three weeks, the US has cut rates by an unusual ½ point, China produced a 1 trillion-dollar stimulus, and this week, Saudi Arabia increased oil production.  All of these actions are for the purpose of stimulating.  The reason they are stimulating is that I believe a large majority of consumers can't afford the inflated prices of most goods and services with a definitive increase in the wealth of some that spend more than they probably have to.  Hence the Fed is believed attempting to curtail inflation while stimulating it at the same time.  I am very unsure how this works, but could be a factor of the uncharted waters.  I have come to the conclusion that current economic status is another bubble.  Equities continue higher, but how will companies be able to meet like earnings created from the huge 3.5 trillion-dollar hand out, as the Fed is attempting to lower inflation? The Fed is attempting to quell inflation while stimulating at the same time.  Countries around the world are stimulating to keep their debts from piling up even more.  In 5 weeks, the US will have to choose between two candidates that are both apparently much more disliked than liked.  A great deal of votes will be against the opponent, more so than for the one desired. I think it will similar to the last election with Trump and Clinton, where voters disliked Clinton more than they disliked Trump.  

 

Grains were higher at weeks end with the hurricane bringing a lot of flooding, but in reality, seemingly very little damage to crops. If anything, east coast beans would be the most impacted.  Energy was lower on the week as the Saudi's believe they can make more money selling more oil at a cheaper price.  Don't be fooled as the past 9 days of higher prices was believed used to market into.  I believe the downtrend in energy prices is resuming.  Bonds continued lower all week as the "buy the rumor, sell the fact', continued to be played out.  Bonds are more than interesting due to the Fed's abrupt policy actions.  With the US dollar believed having resumed its down trend, with new low on Friday from contract high, and gold making all time new historical highs, inflation appears still very much intact with the belief of wave 2 of inflation beginning to bottom.  As I do not believe either candidate will want to be strapped with a recession or depression, inflating again, regardless of how, appears the next step on the economic ladder.  

 

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. 

On the date of publication, Chris Swift did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.