Swift Trading Co.

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

For Tuesday, November 19th

Live Cattle: A soft start ended in mixed reviews today for fats.  The trade guess came out this morning for the cattle on feed report and potentially had some impact.  With a guess of 101.4% on feed, 112% placed and 99% marketed, it does not appear bullish.  Some have noted that lighter weight cattle have been placed due to poor wheat pasture conditions in October.  Nonetheless, there appears as many, if not more, cattle to have to process in the coming months.  So, while this is in no way bearish, it sure does make the premiums in the futures market appear to be extremely gracious.  Yes, domestic demand is good.  Yes, export demand is fair.  No, I do not know if demand will continue to grow, or even be sustained at this level.  Due to factors of supply not being as overbearing as in the past, more market influence is anticipated to come from consumer action of how they spend their discretionary funds.  In my analysis, I don't fret too much over the impeachment.  That appears party agenda's more so than a threat to the US.  I don't fret too much any more about the tariff issue.  China is circumventing the US at every turn and I do not anticipate President Trump to concede.  I do fret about the actions of the Fed as I remain very unsure as to the amount of stress one can apply without breaking something, or attempting to achieve a goal of a growing GDP with 2% inflation, and not have every consumer complain that inflation is robbing discretionary funds. This is a repeat, but money is a commodity and has a price to borrow and to loan.  The intent of lowering a price is to entice the purchase of, as is raising the price a deterrent.  In this particular case, the price of money is being lowered in an attempt to entice you to borrow it.  This is the same enticement that has been transpiring since the financial MBS fiasco hit in 2007.  The US, as has been the world, has been on a constant vigil to keep rates low in an attempt to spur further economic activity.  I just wonder how much longer we have to keep the price of money at the bottom before there is a change of significance.  This issue I fret over.  
    
Feeder Cattle: The index continues to soften.  November goes off the board on Thursday and is in line with the index.  The other months have started to create a more normal basis.  The spreads between front end and back end are gaining strength as the August and September contracts get more volume to them.  If this is the end of expansion, after the 2nd quarter of 2020, it should become more apparent in the numbers.  I'm torn between not anticipating a very big decline in price, and not pricing inventory while it is still elevated.  I anticipate that the index and futures over the next several weeks will remain soft.  Not a bear market, but most likely a nasty correction that could be somewhat excessive in both time and price.  So, I think if you are willing to market here, and forego the potential for a higher trade potentially, then marketing inventory at above $145.00 for the spring months may be the way to go. Clearly you can tell there is some indecision upon my analysis.  Friday's on feed report will help with a few factors.  Just keep on the front burner that were anything to begin to impact the fats negatively, the feeders would be anticipated to be hit hard as it is only the premium of the futures that make bidding up for inventory at least in the black. At today's cash, a $147.00 feeder would be at best a small loss.  Were cash to move lower, then the bloodletting starts again.   
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Lean Hogs: Hogs were lower again today, but did recover to only close slightly lower on the day.  
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Corn: A day does make a difference.  The progress report showing still 24% of the crop in the ground, in states that are in the top ten producing states, with 3 of those states more than 65% behind.  Quality is poor, yields will be lower and more unharvested acres.  If USDA stays true, I have to lean with other analysts in believing it may be the January crop report before the hard evidence is seen or not.  I did like the way corn traded today.  A trade above $3.86 March would lead me to believe corn has reversed direction.  

  

Crude: Traders were violent to energy prices today.  Another nickel lower in diesel fuel and crude down over $2.00 at one time today suggests energy is moving lower.  Significant lows were exceeded today and technical indicators turned to match the decline.  I anticipate energy prices to begin trending lower and the two day $.10 drop in diesel is a good way to start one.  I recommend not topping off farm tanks unless necessary.  

 

US Treasury Bonds: Bonds continue to push higher.  Equities are making their new highs during the wee hours of the morning before most US traders wake up.  I am highly skeptical of the sustainability of this move in equities.  I am beginning to think that previous comments during the Fed's move are starting to be realized.  I am awful on my timing, but still believe I am correct on my analysis of the equity and bond markets being in a peculiar place considering the amount of manipulation and gyration of short and long term rates.    

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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