End of Day Market Recap

by Christopher Swift

​2/18/2025

Live Cattle:​

Cattle feeders took an uppercut to the chin this morning.  After last weeks move by the packer, keeping more cattle backed up, the futures traders came in roaring to converge basis in feeder cattle.  Now, had the cattle feeder heeded the positive basis and bought futures, calls, or options spreads, due to them being the cheapest cattle available, this could be of benefit, but if not, then the price of incoming inventory rose and price for finished inventory declined, worsening profit margins.  The next in line to make a move would be the cattle feeder.  Consumers are already perceived as contracting in spending, packers made the move two weeks ago to cut slaughter, and futures traders stopped bidding higher on January 29.  This leaves cattle feeders, and some others, still paying tip top price for product for which few others are.    

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​​Feeder Cattle:​

​Work done updating the index chart this weekend was lost when I didn't save my work.  Nonetheless, I will have it on Wednesday for review.  I was able to move a few waves around that allowed for the 5th wave that materialized.  When combined with excessive sentiment, price, and stretch of working capital, I continue to believe a 5th wave has been made that topped the feeder cattle market for sometime to come.  A new historical high will change the count again, but at the moment, I believe an initial move lower has been made with the past couple of days higher the correction of.  More cattle are waiting to come across the southern border and wheat pasture cattle around the corner.  Recall I believed the same thing in August of '24.  A fundamental function of redirection of cattle from on feed to wheat pastures, coupled with the loss of Mexican cattle created a whirlwind of excitement that had cattlemen believing there was never going to be a top.  So far, there is a top and some cattlemen have over exerted themselves in ownership of historically priced inventory. ​​

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To me, the consideration should be how close to the index can one market cattle to help avoid the wide positive basis.  Buying them appears easy as you just keep buying them.  However, they do have to be marketed at some point and all of that appears be done at a discount.  The basis spreads are already poor to begin with as you are paying top dollar for inventory coming in and marketing inventory at a discount. Attempt to at least try to market them as high as possible if willing to buy them at as high as possible. 

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​​Class III Milk:

​Milk ended the day slightly lower.  Consolidation is taking place and is expected to break out to the upside. ​

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Corn:  

​Corn, beans and wheat were all higher.  The corn market is front and center due to a belief a 5th wave is materializing.  I recommend producers use this rally to market old and new crop into.  This is a sales solicitation.  I no longer recommend cattle feeders buying call options for protection on corn as the near $.70 rally in July has fulfilled most of the expectations.  ​​

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​​Energy:​​​​​​

Energy was mixed.  I am no longer bullish energy.  The cooling of world conflicts is bearish energy and although I do not expect any increase in US oil production, I do anticipate a decline in demand.  ​​​​

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Bonds:​​

​Bonds are lower because inflation is entrenched, stagnating, and believed causing some to contract in discretionary spending.  Like the box beef price no longer being a reflector of consumer demand any longer, due to manipulated supply cuts, consumer inflation may be caused by the still shortage of some goods and services rather than outright demand for.  Nonetheless, inflation continues and the current administration appears holding back no punches in an attempt to rein in previous frivolous spending.    ​​​​

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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.