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This is some great information from Chris Swift. If you are not subscriped to his mid day commentary you can learn a lot:
Mid Day Cattle Comment (Get your finances in order)
December 7, 2023
My opinion alone, not to be confused with fact, is that futures are being dominated by a few traders and all the producers that did not manage their risk. Those that did, will need more working capital in order to achieve the benefit of the positive basis. Cattle feeders are urged to use the futures, where the discount is available. As prices may soften further, will be on task to average our purchase price lower. However, if prices move higher, we will then be able to use the proceeds from to offset the higher cash price. Get with your lenders, because it is going to be more capital intensive to produce cattle going forward. Especially if you didn't manage your risk.
June fats has my undivided attention. A trade above $166.37 will suggest overlapping of waves and help to determine a bottom has been made. Until then, I think it as possible to trade June to a new low, under $162.77. Were that to take place, I will be looking to catch a falling knife with purchases. Packers are urged to be considering ownership of these months, due to the anticipation of light 1st quarter placements. The recognition of increased beef production in the first quarter is anticipated to weigh heavily on the December, February and April months. The anticipated lighter placements, beneficial to the June contract month and out. I continue to believe that April fats will trade to, or under June fats.
Like the June fats, March feeders have similar lines in the sand drawn for action. A trade of March feeders above $216.30 will suggest overlapping of waves and help to determine a bottom. A trade under $210.87 will suggest a minor 5th wave is unfolding and I will look to add to initial fence options strategies. I recommend you get your ducks in a row. The futures are believed being dominated by a few traders and producers that are under severe financial pressure. Those that used risk management are believed flush with capital and will be anxious to reload, while others are still trying to get out. I anticipate this year's pricing events to have significant ramifications on the industry going forward, as there is now believed a significant divide between those who used risk management and those that did not. Even those that just used LRP insurance will still make the producer whole when marketing, so they too should be ready buyers when the opportunity presents itself. The cash market appears to be firm, and the tremendous change in basis has made for opportunity to buy cattle cheaper in the future that has not existed all year.
I recommend cattle feeders prepare to hedge the procurement of feeder cattle this spring. This is a sales solicitation. I recommend backgrounders procure physical inventory, wait for a major wave B rally, and then look to lay off the risk. These are sales solicitations.
CME Feeder Cattle Index $222.31 NOV 2024 CME Feeder Cattle Futures $237.27=
-$14.96/CWT Basis (at the end of a month they cash meets the futures)
I encourage you to read Chris Swift’s article today! He always has interesting things to say they are found under Mid day and “Shootin the Bull"