"Shootin' The Bull" Commodity Market Comments...
For January 19, 2022
Live Cattle: Packers are included in the aspects of no one having had the opportunity to buy replacement inventory at a lower price. As well, if they begin to adhere to the inflationary aspects further, they will start to buy more than they need in an attempt to average the higher prices. Some good news on the employment front is that in December of '21, the level reached on the employment to population index was higher than the 2011 low made upon the financial crisis. The greater the work force to population, the more there are to pay for the subsidies and fewer to obtain them. Of one thing though, this index has been in a bear market for years. So, periods of the index rising are deemed more supportive to economic growth. Unfortunately, the index falls quickly and rises very slowly.
All contract months were higher today with October double topping at contract high and December at a new contract high. A close on the weekly continuation chart above $138.90 will go a long way in suggesting to anticipate further upward movement.
Lean Hogs: Hogs ended the day firmer with the index up $.88 at $76.78
Corn: Sharply higher grains, with no shortages of, leads me to believe end users are running low of inventory and having to replace at the higher level. I find it more than interesting that farmers have the highest price available to them today and few have any interest in selling. The July of this year is nearing the high made in December with further out months setting new contract highs. July of '23 corn is making headway now. Recall that if there are fewer acres planted, or yield is impacted, or both in this crop year, the shortage will be felt the most in July of '23. November beans appears to have completed a mild 3 wave correction with today's higher trade believed the start of a new wave sequence higher. Pork and poultry producers saw a mild break in meal prices, and have since already started pushing meal back higher. Again, every time a producer runs low, they have to go to the spot market, where prices are currently the highest, and more likely than not, will buy a little more to help average out the rising costs. Lastly, nothing the government is doing will curtail inflation, so sit back and watch when the afterburners kick in upon raising rates. The semi that costs 250K with a $1,500.00 monthly payment will soon still be 250K if not more, with a $1,750.00 monthly payment. Money has a cost and is therefore an input cost. Grains, oilseeds and the products are anticipated to continue to move higher.
Energy: Energy prices continue higher. Lift restrictions on distribution and production and the issue is resolved literally overnight. Clean energy is not clean. Every apparatus that stores or generates electricity has to come from a source that entails the use of fossil fuels, child/slave labor, stripping of land, polluting of land, air and water, or confiscation of millions of acres in the name of eminent domain. Do not think clean energy is clean. If you like the Beyond Meat product, it starts with an oil rig somewhere in the west pumping oil to a cracking unit to process into diesel fuel for which the farmer cranks up the John Deere to plow under 2 million acres to plant peas, then sprays pesticides and fungicides all over them, harvest them with an even bigger John Deere, add over 30 chemicals and additives, then have it delivered with a fossil fuel burning semi truck, ship or airplane around the globe. Show me where the green or clean aspects comes from on this production line. Sorry for the rant.
Bonds: Debt instruments were higher in price today. Coming off new contract lows yesterday does not give this much flare. Equities continue lower and the US dollar index may have completed a minor correction of the initial decline. Of most interest is the gold market. Not having participated in the first bout of inflation, and shamed of ownership by crypto coin aficionado's, gold may have its day yet. Gold traders took gold out of a long term trend channel today with the second highest close since July of '21. Traders exceeded previous recent highs with the $1,880.00 mark seemingly in their sights now. From a major wave count standpoint, I believe gold is on the verge of making new historical highs. Whether right or wrong, I believe the current administration will only go to make the situation worse than better. Therefore, we may not see much relief until the mid-term elections.