Live Cattle: Packers have regained margin with cattle feeders marketing bison sized carcasses. Rationing has finally impacted the industry to a point in which I believe it will become more difficult to produce another stranglehold on the market. Even though the President will be blamed for the reversal, it appears the fundamentals were not going to be able to sustain the higher price for much longer. The exposure of unknown, unreportable cattle on feed, producing historical carcass weights, is believed what has turned the price south. Until cleaned up, the packer is anticipated to have inventory to work with and in black margins again.
Feeder Cattle: The basis pricing structure is construed as friendly towards cattle feeders. Futures are in a full fledged inverted carry, suggesting that every contract month is lower than the previous. This produces significant discounts to cattle feeders that can use the options market to solidify procurement at the discount, or with spreads strategies, create a window for which to procure inventory.
Backgrounders are urged to remain net short and use only long call options to attempt to capture open position equity if desired. The loss of the aggressive stance of cattle feeders is not expected to return unless the farmer/feeder decides to reload. The projected losses at placement are too great for lenders to assume the risk, but with the lower cost of gain, and expected significant returns on cattle this year, farmer/feeders may become willing to step back into the ring on the approximate 10% decline from the index high. If wanting cattle cheaper, the futures is where to obtain them.
Corn: All were sharply lower. Recommendations to own the KC July wheat were stopped out at today's low and Chicago is breathing down the neck of its stop area. Grains have collapsed this week. Why, I am not so sure, but seemingly with so much hinged on the ability of equities to continue higher, or the economy cooking at present rate, traders may be a little nervous to own anything at the moment.
Energy: Energy was sharply lower. Diesel fuel led the way lower today. If the issues with refining subside, I anticipate energy to plummet.
Bonds: Bonds ended the day a little higher. The price action upon release of jobs data this morning produced a new low in this decline, but was quickly bought to be plus on the day. I have no faith in the numbers of employment data at the moment. I am more negative bonds than positive with expectations of today's low being exceeded. Next week will be holiday abbreviated. I don't expect much next week, but the first two weeks of December are anticipated to be active in window dressing and preparing for another year of escalating divisions between left and right, and whether the US continues to see stagflation, the start of deflation, or resumption of inflation.
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
This is intended to be or is in the nature of a solicitation.” Futures trading is not for everyone. The risk of loss in trading futures can be substantial; therefore, carefully consider whether such trading is suitable for you in light of your financial condition. Past performance is not indicative of future results, and there is no assurance that your trading experience will be similar to the past performance.
