“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

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5/8/2024

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Live Cattle:

Nearly half the year is over with and the triangulation of prices continues.  This is expected to continue as packers appear reluctant to increase slaughter that would reduce their margins. More companies are sending out warnings for the 3rd quarter, as aspects of lower earnings and slowing business is foreseen. Energy continues to reflect weakening growth as crude oil and gasoline made new lows in this decline today.  Although the EIA report pushed crude back to plus on the day, the trend lower appears well established now.  Further consolidation is taking place within the industry as Central Valley Meats bought a Cargill processing plant in Fresno, California.  Feedyards are believed ripe for the same type of consolidation.  The cow/calf sector appears in the midst of some further lateral moves that will look like expansion to some and liquidation to others, but pretty much keeping the scale of production as is.  The agenda is accomplishing the goal of rationing beef to the consumer, keeping cattle prices from meeting some of the more loftier goals others may have set.  

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Feeder Cattle:

Price action in the feeder cattle market has negated the move produced by the on feed report.  The on feed report produced a one hour rally and has been declining ever since.  Today, the low exceeded that Friday's close, therefore having retraced 100% of the gains.  That does not give the feeder cattle a very good look.  As well, Tuesday's trade saw an exodus of traders from the live and feeder cattle open interest.  Interest in both markets is falling.  The wave count on the feeder cattle index suggests to anticipate a decline to $230.00.  I expect this to be accomplished by months end.  A trade of the index above $247.18 will void the wave count.  A close of August futures below $25.175 will lead me to believe a minor wave 1 and 2 have been completed with a minor wave 3 down in progress.  Upon such, a downside target for August would be a close at $240.20.    

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Hogs:

Basis convergence slowed today as the over $11.00 decline in June hogs may have seen a very short term bottom.  I don't expect the index to climb much higher, leading me to expect further lower trading of futures to expire to the lean hog index.  

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Corn:  

The rally appears to have been a present to farmers.  Here's the trough.  It's been replenished up the same levels we saw in January.  Now all that you have to do is dip your hat into the water trough and take some out to use.  As in, market that grain and turn it into cash to pay down debt or place on deposit for a return higher than paying for storage. Corn, beans and wheat are expected to trade lower.  

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Energy:

Energies were soft until the EIA report was released.  Both crude oil and gasoline set new lows in this decline today before reversing getting plus on the day.  Diesel fuel had been lower and tested its previous low, but was able to rally slightly with the others.  Energy is in a bear market and stagflation is eating into consumers discretionary funds.  I expect further declines in energy prices.   

Bonds:

Bonds were lower, but not by much and they have rallied a good bit lately.  So, today's softer trade doesn't hold much in the way of predicting the next most probable move.  I expect the stagflation to continue to weaken consumers ability to spend, therefore, creating a need to finally lower rates some.  

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