"Shootin' The Bull" Commodity Market Comments...
For Tuesday, April 20th
Live Cattle: Traders apparently have whittled down enough positions to slow their selling. Fats rallied a little today, but the loss of open interest on Monday tells the tale. Regardless of the skew that the Covid issues caused last year, this years placements are going to be high, even with the skew. As April is now appearing to be a heavy placement month as well, packers are anticipated to have ample inventory to work with beyond the Labor Day weekend. Traders may keep prices sideways to firm going into Friday. Everyone will have a different opinion on the numbers by Monday, but all in all, skyrocketing beef prices have done nothing for cattle prices so far, and the consumer, faced with rising prices of necessities, are faced with near historic retail beef prices as well. I think the debate over pent up demand will carry through August. Many will continue to say the surge is coming, but I don't see a week or month in which unemployment would fall so dramatically it would impact beef prices. I think the surge is here and will only fade through the summer as consumers have to shift discretionary spending once again, in a relatively short period of time to absorb the higher costs of living. As well, what if this is just the start of higher commodity prices?
Feeder Cattle: With front end now in a positive basis, and back end having narrowed basis to near $10.00, traders probably relaxed a little in their selling, allowing for a rally this afternoon. A trade of August to $156.00 would lead me to wrap up any loose ends in marketing you may have with a fence options strategy. This is a sales solicitation. With the index plummeting, it leaves a wide gap to be filled between the index price and short call strike price. The index is now only $3.48 from the $135.00 target of the wave 2 correction on the primary count. A trade under $133.86 of the index will suggest the primary wave count is no longer valid and the alternative count becomes the primary. A trade of the index under $133.86 will lead me to anticipate a trade down to $125.00. Futures trading and the index reading have pushed basis out sharply at the close today. I see no incentive to the cattle feeder to assume the risk for the profit margin available.
Lean Hogs: Hogs continued to retrace last weeks sell off. May has set a new contract high. The index is up 13 weeks in a row. I anticipate a lot of bad news to be factored in. I have no idea if this is the top or not, but hog producers that are not under contract may or may not benefit from executing a fence hedge options strategy to market summer hogs. This is a sales solicitation.
Corn: New contract highs across the board today in grains and oilseeds.
Crude: Energies were soft today.