“Shootin’ The Bull”
End of Day Market Recap
by Christopher Winward
7/3/2024
Live Cattle:
Futures traders were no friends to the cattle feeder today. Little in the way of premium on fat futures to work from, and higher feeder cattle prices to just add a little insult to injury. There remains little to discuss as the positive basis spreads and historical amounts of working capital at risk, creates an enormous void to have to contend with. Convergence is the only thing to fill the void and that could take place at any price level. Regardless of the price at convergence, if one decides to use futures or options, it’s a $10.00 haircut off the top. While the basis spread is not unusually wide, it is the working capital at risk that is bothersome, making it feel more like it is unusual.
Feeder Cattle:
Futures traders are coming through for you again. While nowhere near what they have been offering, at least they have given you a little over $5.00 of premium on futures contracts to work with. The risk/reward situation between everything below the cattle feeder and the cattle feeder is amazing. Profit margins have been good all year for backgrounders and the sectors below. For the cattle feeder, they have endured a string of losses the first of the year and are believed likely to see profit margins today, slip into the red if fat cattle prices don’t move higher. Futures contracts offer nothing but detriment to the cattle feeder with the stark positive basis. Backgrounders have had scads of premiums to work with and still do. The difference between the two sectors, and the futures markets representing them, leads me to expect some sort of adjustment in the starting spreads. While little has changed in the spread since March, it has been widening back out, adding more insult to injury. I’ll be anxious to see if the rally holds into next week.
Hogs:
Hogs are mixed. Basis is converged in the front two months, leaving little room for speculation without a direction from the index.
Corn:
Ditto: Corn and beans are in bear markets. I expect further downside price movement. I think there may be some damage occurring, along with some lost acres. I don’t think the market cares at this point due to the excessive stocks still available from last year.
Energy:
Energy posted a rousing rally today from a lower trade in all. Gasoline and crude finished plus on the day with diesel fuel close on their heels. I am not bullish energy, but have admitted I was wrong in believing energy prices would move lower.
Bonds:
Bonds are higher today. I expect bonds to continue higher. Economic reports today helped to add a little coal to the fire. I recommend buying September bonds with a sell stop to exit only at $116.10. This is a sales solicitation.
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.
