Swift Trading Co.

"Shootin' The Bull" Commodity Market Comments...

For Thursday, July 9th

Live Cattle: Traders once again blessed producers today by allowing them to market inventory dollars above current cash price.  By the close, they were not as friendly to continue to do so.  Equities created an oddity today that may be viewed as exhaustion.  Today was the 8th day in a row of straight up trading in the Nasdaq, while the S&P and DOW were unable to exceed their early June high.  This divergence is believed as topping action.  The future has hurdles seen and unseen.  The seen hurdles bother me greatly.  The unseen ones scare the ____ out of me. The issue going forward has little to do with cattle or beef production.  The issue going forward will be the continual changes in lifestyles that are anticipated to impact consumer discretionary spending habits.  If kids don't go back to school in the fall, a parent may have to stay at home and that is potentially a job lost.  As markets seek equilibrium, so to does the consumer.  I think the silent majority is speaking with their discretionary spending habits.  Were beef movement to slow, that to me would be a key signal the consumer is, or has changed discretionary spending habits.  There is a lot being asked of the consumer.  Most of it very conflicting, confusing, or creating significant strife.  The consumer does not tend to spend freely when conflicted.  At this time, the above comments leads me to not want to assume significant risk when supply is ample, processing capabilities ample, and the consumer questionable.   
Feeder Cattle: Some are bidding up for inventory.  I can only assume that the answer for why is one of two. Either they have laid off their risk with the higher fat futures, or they think the cash market is going to rally sharply going into the fall of the year with elevated beef production and a consumer believed beleaguered by multiple issues.  It doesn't matter.  The more a feedyard, or whomever, pays up for feeders, they are merely narrowing margin as cash has yet to move, and futures offering the only profit potential.  Cattle placed today will hit right at Christmas.  If you are one bidding up for inventory, make sure you have it hedged or forward contracted.  
Lean Hogs: Hogs were higher today. 


Corn: Corn and beans are believed to be in a corrective pattern to the upside.  A trade above $3.63 December corn and $9.12&1/2 November soybeans will lead me to recommend booking a substantial portion of this years, last years, and potentially the year before that's crop.  With today's rally, maybe tomorrow's trade, prior to the weekend, would produce these new highs.  Were it so, I may look to market some inventory Sunday night.  I will make myself available Sunday evening when the market opens at 7:00 pm if needed. 
Crude: Energies were lower.  I believe energies have topped for a while.  This may only be a correction to the downside, but it could be further pushes to new contract lows.  It may be difficult to see negative prices again, but with so little news, or events that transpired during that, it may not be over with yet.  As well, summer is winding down.  The RV's. boats or ATV's have been bought, used and soon getting ready to go into the shed until next summer.  School will be the upcoming event.  How we send our kids back to school or not will produce significant shifts in consumers spending habits.  
US Treasury Bonds: Bond traders stepped up to the plate today and pushed bond prices higher as economic conditions have them looking for Pavlov's (the Fed) bell to be rung.  With more rumblings of another stimulus package, and nothing seeming to unify the economy or consumer, it may be time to throw more money at the situation.  As we know that further stimulus suggests what should be working is not, potentially the equity markets may begin to reflect a share price closer to current revenue streams than at present.  Fighting the Fed has proven once again costly.  Hopes of not having to further stimulate are now fading to hopes of the stimulus being enough.  I find it very difficult for the government to attempt to make up the margin of lost revenue with PPP loans and corporate bond buying practices.  Especially when the PPP loans and bond buying practice dries up and the revenue stream has yet to flow positive.   

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
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 their 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.

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