“Shootin’ The Bull”

End of Day Market Recap

by Christopher Swift

​12/30/2024

Live Cattle:​

Costs continue to rise to produce a pound of beef.  Whether the feeder steer, corn, fuel, or interest rates, all are elevated with expectations for some to continue higher.  Lenders are on full alert with futures at or near contract high, producers clamoring over one another to own inventory, and a demand outlook pretty much dependent upon the resilience of the consumers ability to spend at current levels for months to come.  Another agenda appears to be forming on the horizon.  The first, and well accomplished has been this years ability to sustain equal beef production to the prior year.  Although it took everything to do such, it is unlikely that it will diminish in '25.  The newest agenda is believed the rationing of producers.  With too much packing and production capacity on hand, for the number of cattle that need to be tended to, one either continues to bid higher to remain in business, or does not.  This is rationing, no different than in any other business or form.  

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Feeder Cattle:​

With the above stated, I think one has to prepare for both of these factors.  One would be that producers want to stay in business and will continue to push prices to heights in which consolidation or vertical integration is achieved.  Two, to some extent this may have already been achieved and prices begin to decrease as the number of buyers decrease.  ​

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Of some interest to me is this observation.  The frequency and volume of cattle trading currently is exciting.  Cow/calf producers rarely participate in such, simply due to the birth rates of cattle.  Even if both spring and fall production time frames are used, that is twice a year in sales instead of just one.  Younger cattlemen appear to want to be in on the sale barn action, backgrounding or even feeding, enjoying the constant movement of cattle in and out.  No doubt, the revenues and payouts have a tendency to be larger.  However, at a great cost to cow/calf production.  It is slow, land and labor intensive, and at times, marketing twice a year can be sketchy instead of marketing consistently and averaging better months over others.  I see more wanting to gravitate towards the more exciting aspects and leave the breeding to someone else.  Unfortunately, there isn't someone else.  Hence another reason I don't expect expansion to take place to any extent as some believe. 

I think it as possible to see futures traders push futures to or above $270.00 as it would be to take them to $200.00.  I think it as possible that futures make new highs, but not the index.   Lastly, I think it as possible that if new highs are made on either, it will bring cattle closer to a top than extending them to further price levels.   

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​​Hogs:

​Hogs were sharply lower with the index down $.25 at $84.85.  I anticipate a downside target of the index to $75.00.  ​​

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Corn:  

​Corn broke out this morning to new highs from contract low.  Although it seems a few farmers jumped on this, I expect higher prices for corn going forward.  Inflation is back and there is scads of money floating around or in investments that could easily be turned into cash.  Feed costs are the second highest input cost to the feeder steer in beef production.  It is going up with recommendations having been made when it was cheaper.   ​

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Energy:​​​​​​

​Energy was higher to start the week.  Both crude and the products were able to remain plus on the day and push higher, out of long term sideways movement.  Diesel fuel led the way with spot February trading over $2.30 now. Carry is swapping now with diesel fuel going into an inverted carry, while gasoline goes into carry.  With recommendations having been made pretty consistently to top of farm tanks, book some spring fuel, or buy call options on crude oil, today's price action is believed helping to confirm these recommendations. ​

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Bonds:

​Bonds, and most note's, came off last weeks lows by a little.  It will take a lot higher movement to offset the past couple of weeks damage.  Bonds are in a bear market with seemingly no interest in buying them.  Rates do not appear as if they will soften anytime soon.  ​​

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​​This is intended to be or is in the nature of a solicitation. 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 the 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.