In my opinion, the desire for a vertically integrated supply chain is causing significant discrepancies in the risk being assumed between those inside and outside of. Nonetheless, the industry was hitting on all 8 this week with everyone having the opportunity to trade at historical highs, as well as packers back in the black. There is little to anticipate that I know of. Without the border reopening, and signs of expansion, the supply of cattle to be placed on feed is not anticipated to increase. This suggests one of two scenarios. One is that competition doesn't let up and prices continue to climb as great market share is sought. Two, an unfortunate aspect of the rally may be that not everyone can participate in the assumption of risk under current capital requirements. I am sure the industry does not want to see anyone unable to compete, but with government controls on imports of cattle, and beef being supported by a few within the industry, this issue clearly swings advantages to one side. As well, when having read about the time line of when, and who, knew about the human contraction of the screw worm prior to public release, has a faint odor of collusion. Article HERE.
Feed and feedstuffs are plentiful this year, but corn is resisting to trade under $4.00. Until harvest data is available, the discrepancy between USDA and Pro Farmer may be enough to keep corn from trading much lower. As of Friday's rally, it appears traders are more willing buyers than sellers. Beans on the other hand could see some price action in the next two weeks. Conversations this week led to acknowledgement that some areas could use a rain to complete filling pods. The plant and pod count continues to be good, but those pods still have to fill. If there is no rain within the next two weeks, those pods may not fill. If it does rain, then it may have been in just the nick of time. Either way would be anticipated to produce a hefty move higher or lower in beans. Energy was lower on the week with expectations of it softening further. Bonds have been volatile this week with advances outside of the triangle quickly pushed back into. Bonds didn't react much to the government reports this week either. The FOMC meeting in September is believed when the Fed will lower rates. Whether this will be a signal that the economy needs stimulating, or the stimulation brings stagflation out of dormancy, will be interesting.
Christopher B. Swift is 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.
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