In my opinion, the Moore Research seasonality's can be of help when attempting to make marketing or procurement decisions. While not always exact, or that markets can even trade counter to the seasonality, but presents a good idea of what to expect. The past several months, the markets have shown an uncanny correlation to the seasonality. Therefore, I am going to continue to watch and take heed on changes and shifts reflected by the seasonality's. At present, cattle and feeder cattle tend to top at the end of January, decline into the first week of February, rally the second week of February and then decline into the first week of June. This week, we saw both cash and futures soften. Next, either cash will erode further towards futures, futures rally to cash, or they both attempt to meet in the middle. Either way, by Friday's close, producers are urged to have plans on how they will navigate the next few months. The positive basis spreads created this week in live cattle and feeder cattle were so terribly wide, it increased the risk of loss to producers more than helped manage it. A goal to achieve next week will be how much narrowing of the basis takes place before Friday. If cash moves lower to futures, then futures may trade sideways until cash moves closer. If futures move higher towards cash, then the basis will still be narrowed, but offers a higher price to market with futures or options. Regardless of which, or by how much basis converges, after next Friday, the seasonality for live and feeder cattle is lower into the first week of June. It is not unusual for the cattle market to peak early in the year and not make new highs for the remainder of. I found, without too much trouble, that the August of '12. '13, '20, & '22 contract months made their highs in the first quarter and never made another new high. Whether '25 will be one of those years or not, the declines of those that did were between $20.00 and $40.00.
What extremes the cattle industry has worked itself into. Too much processing and production capacity, perceived fueled by government spending, has caused cattlemen to literally fight over remaining inventory. Hence the extreme of historic prices. As well, previous government spending, coupled with lax immigration stance, produced not only a large increase in per capita consumption, but fueled a percentage of buying from those who could never afford beef or a more consistent diet of. With the current administration attempting to reverse the previous spending, I anticipate some of these extremes to soften. Oil has become much more closely watched now that it isn't going up any more. Higher energy prices can tend to reflect a growing economy. This is what I expected and saw the results from when at $80.00 a few weeks ago. However, back to $70.00 again and I have to wonder if I am correct. I do not believe that there will be any increases in oil production anytime soon. Therefore, a price drop would lead me to believe lower consumer demand and that would begin to suggest a weaker economy. Europe, Asia, and other countries are in very poor economic and social shape with the US trying to get out of a very poor shape. An argument on the Unemployment number Friday morning is between those who will say, "with more people working, more will be able to afford beef", and me who thinks the employment is increasing because consumers are broke and having to go back to work, or are seeing government benefits dry up.
Corn continues to trade higher with Friday a new high from contract low. Although it sold off a little from the top, it has remained very strong with good demand and lower supplies. Beans more or less held their own this week. I continue to expect corn and beans to firm. Although I do not wish to be short wheat futures, if one wanted to make some new crop sales with this week's rally taking Chicago and Kansas City above $6.00, this might be a good place to start averaging some sales. Bonds continue to reflect the persistent inflation. Today's price action in bonds was more than phenomenal, it was deadly. In less than a few seconds, bonds traded from 116'03 to 117'01 and back to 115'24 in the same minute. Algo traders took humans to the wood shed and killed them as no, or very few humans can act or react in that short of a period of time. The volatility and price expanse caused by algorithmic trading will consistently be intertwined with human interaction. While unavoidable, laying out risk and reward parameters when attempting to market or procure inventory will help to overcome some of these sharp gyrations in price that are meaningless to the fundamentals of price.
Christopher B. Swift is 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
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