In my opinion, division between producers and futures traders narrowed on Friday as futures traders and participants were able to claw back a small portion of the wide basis. Cash trading lower, and June futures higher, converged a wide basis to June in a short period of time, for which many questioned earlier this week. Friday's rally was unexpected, but the width of basis most likely made few cattle feeders want to accept the lower price. Cattle feeders remain in a risk laden environment simply due to the basis alone, while continually paying higher prices for replacement inventory. Backgrounders won the week with futures traders narrowing basis and exceeding last Friday's sharply higher trade. It appeared for the week that the direction could have gone either way, but cattle feeders have yet to relinquish their appetite for feeder cattle. There is little to comment on that hasn't been hashed out thoroughly. Next week begins the video sales with expectations of larger volumes than last year to be marketed. Pulling cattle ahead, while today is the highest price to achieve, seems to be the norm. As I have mentioned before, stating the obvious is not a foretelling of price direction. It simply reflects the position of the cattle feeder with great expectations of how they will continue to manage record profits on hand and significant losses projected in the future.
Two significant narratives changed dramatically by the start of trading Monday. The loss of the strength in energy and a shift in weather patterns caused grains to hit the skids. Energy has continued lower through the week as have grains. Corn is believed a drag on beans and wheat. Beans were able to push a little higher by Friday, but not by much. I continue to be friendly beans, but have no idea how much of an influence weak corn may be on them. Bonds were able to creep higher through the week, but not by much, or any noticeable change in the retail rate market. As recession was a topic prior to the run up in energy prices, now that they have subsided, the GDP lower than anticipated, and new home sales down 13%, recession is a topic again.
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.
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.
