Live Cattle: Still kicking the same dead horse, but this time with a little more enthusiasm. Hindsight has become a distraction to producers for which one can clearly see each marketing made was at too low of a price in comparison as to what is seen today. As I have been labeled the "Jim Cramer" of cattle by some X followers, I came across a bit of wit that summarizes comments I have made that were not always correct, "one good thing about being wrong is the joy it brings to others". With a sizable increase of open interest on Tuesday, it appears that new long futures traders are offering to assume your risk at a slightly narrower positive basis, and at new contract highs. New short futures positions are believed marketing at not only new contract highs, but historical levels. With the clarity of hindsight, and the haze of foresight, producers remain in a position for which they have consistently increased input costs with no expectation of profitability without a significantly higher fat cattle price. I recommend you admire the hindsight and continue to manage risk as best you or I know how, to combat the haze of foresight.
Feeder Cattle: Feeder futures lost over 2,500 contracts of open interest on Tuesday. Participants didn't find the close proximity to contract highs as exciting to push through as did fat traders. Back month discounts don't offer much in the way of significant benefit, but are the cheapest feeder cattle available at the moment. To the backgrounders buying grass cattle for the moment and marketing as feeder's in the fall, pay close attention to the discounts as this should impact what you are able to pay for them. As I continue to have no idea as the lengths one will go to remain in the cattle business, I recommend you scotch what you can, and hope the cattle feeder remains overly aggressive to place cattle.
Corn: Corn was soft. I anticipate corn to move higher. For corn farmers, I recommend buying call options in December corn at strike levels you would market physical product were those price levels achieved. This is a sales solicitation. By spacing them apart, as those strikes are met, lay off new crop sales and you are still long the market. What this does not do is offer any form of downside protection or pricing. As well, if nothing happens, you will still have to write off the loss of the call option premium paid. This recommendation is to offer you a way to market your cash crop at higher levels with any expectations of a higher price achieved by the long call options.
Energy/Bonds: Energy has been volatile today. Large short term price swings, a gap higher, new lows, and well off the lows by the close kept futures traders glued to the screen and media outlets. When lower, I recommend you do what is available to reduce average price paid. With previous recommendations at higher levels, and the need for fuel never ending, averaging down the costs of initial hedges or purchases is recommended. Bonds gapped higher, traded sharply higher and closed nearly on the low of the day. Equity share prices soared as well, but as I finish this before the market closes, traders have given back a large swath of the gains made in today's price action. I continue to believe equities are in a bear market with rallies used to make sales of a the higher price.
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
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 their 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. .
