![]() Of one thing is for sure, consumers have a breaking point, and cattle are very high priced in consideration of competing proteins and all other aspects of consumer inflation. Simply look at breakeven input costs and know that without continually higher fat prices, a return on inputs is less likely. An unfortunate factor of cattle production is that a great deal of profit margin hinges upon a consistent rise in price. This cattle market is 2 years old now and there are few that don't know the US has fewer cattle than last year. Hence making the 5th wave vulnerable to set backs if a bull market and sharp rallies if a bear. The 5th wave tends to have weak shorts and over zealous longs as its creator. Traders tried hard to push to new contract highs. I recommend buying the at the money October live cattle put. If so, the October live cattle contract could come under some pressure. Therefore, with this potential, and not much else of a place to go with them, the placements in May and June could be lower. This may well be robbing the future of cattle, but price today is anticipated to speak volumes over what the future may hold. Regardless of the limited numbers, it is very possible that we could see elevated placements at some point. News of the drought impacting the Flint Hills is troublesome. Regardless, having recommended the at the money puts for June and August delivery, production can carry on with limited risks of downside price pressure. This is simply due to a belief that not nearly as many are managing the risk, but merely juggling it. One factor that stands out is, the bulls think the bears are stupid and the bears think cattlemen are assuming more risk than they can handle. So, here is most likely another outcrop in the wall of worry to climb over. Primarily due to energy prices moving higher and bond prices lower. Lastly, whereas I have been perplexed on which would lead, inflation or recession, I am now leaning more towards inflation than recession. That just so happens to coincide with higher retail gasoline. As processing will take around two weeks to start getting that historical high cattle's beef to the grocery store shelf, this is where the consumer is anticipated to get the next look at higher beef prices. Last week and this, saw historical highs for fed cattle. “Shootin’ The Bull” End of Day Market Recap by Christopher SwiftĪ series of fundamental factors are going to be played out over the next 3 to 6 weeks.
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